Big Tech's AI buildout is increasingly funded by debt and equity sales, shifting from self-funded models and raising investor concerns. Goldman Sachs notes that free cash flow for these companies is at its lowest since the dot-com era, with Amazon's 2025 capital expenditure consuming 94% of its operating cash flow. Alphabet's Q1 free cash flow dropped 46.6% year-over-year while its capital expenditure doubled. Meta's Q1 free cash flow grew only 11.7% despite a 33.1% revenue growth. Oracle plans to raise about $40 billion in fiscal 2027 on top of $30 billion already issued, and its FY26 free cash flow was negative $23.69 billion. Meta raised its 2026 capital expenditure guidance to $125 billion to $145 billion, and NVIDIA has $119 billion in supply commitments disclosed in Q1 FY27. This indicates a structural shift where these companies are relying more on external financing than their cash reserves.
This increased reliance on debt has led to significant borrowing. Alphabet issued $31.1 billion in senior unsecured notes in Q1 2026, adding to $24.8 billion raised in November 2025, with long-term debt jumping from $10.9 billion at year-end 2024 to $46.5 billion a year later. Amazon's financing cash flow turned positive by $52.8 billion in Q1 2026, after being negative throughout 2024. Oracle and NVIDIA are also tapping debt markets. Additionally, Meta filed for about a $30 billion offering, and Amazon filed paperwork for a loan facility. Total spending by the biggest tech companies on AI is expected to reach $750 billion this year, with much of it coming from the bond market.
Investors are becoming cautious, leading to market reactions. In the week ending June 24, U.S. equity funds saw $3.53 billion in net outflows, partially reversing a $37.63 billion inflow from the previous week. Technology-focused funds recorded nearly $20 billion in outflows that week, a sharp reversal from $21.46 billion in inflows prior. This caution is fueled by renewed concerns over lofty valuations, rising corporate borrowing, and uncertainty regarding the Federal Reserve's monetary policy. The 10-year Treasury yield, currently at 4.5% (the 94th percentile of its 12-month range), is becoming a critical factor for tech investors, as it sets the discount rate for future AI cash flows. The 10Y-2Y spread has compressed to 0.29%, suggesting the bond market is questioning the growth narratives of these tech companies.
Concerns about equity market capacity also emerged when reports that Meta might raise tens of billions through a stock offering caused its shares to fall 5.5%. The Nasdaq 100 Index dropped 4.8%, its worst session in over a year, while the S&P 500 Index lost 2.6%. This indicates that the market is apprehensive about its ability to absorb a flood of new shares from companies seeking to fund AI ambitions. Furthermore, the AI spending spree is impacting traditional financial strategies, with stock buybacks diminishing; among the four biggest AI spenders (Alphabet, Microsoft, Meta, and Amazon), only Microsoft bought back shares in Q1, according to Bloomberg data, marking a significant change from previous years where buybacks supported stock prices.
