Hyperscalers’ $700 billion spending spree risks margin pressure if AI-driven free cash flow fails to materialize by 2028.
Apollo Global Management’s chief economist warned that a delay in hyperscalers’ AI-driven free cash flow could severely impact Big Tech’s financials. Wall Street expects a cash flow boom starting in 2028, but heavy AI investments have already slashed free cash flow, forcing firms like Amazon, Meta, Google, and Microsoft to issue debt to fund spending now projected to exceed $700 billion by 2026.
Traditionally cash-rich, these companies have shifted from generating to consuming cash, relying on future AI revenue to reverse the trend. Bank of America analysts noted the pivot, highlighting the risk if earnings disappoint or capital expenditures and depreciation outpace returns. Margins could tighten further if AI profitability lags.
The warning underscores broader market concerns about the sustainability of Big Tech’s aggressive AI bets amid rising debt levels and uncertain timelines for monetization.