GoKawiilAlmost four years into the artificial intelligence boom, the world's biggest tech companies are still making grand promises about the future. The problem is, they're burning through their cash in the process.
AI spending among the megacaps is projected to reach $765 billion this year, before rising to nearly $1.2 trillion in 2027, according to Goldman Sachs . Amazon boosted its capital spending forecast for the year on Thursday to $220 billion, the highest among the four hyperscalers.
Amazon also reported negative free cash flow for the trailing 12 months of $7.6 billion, a day after Meta disclosed a 91% drop in cash generation from a year earlier. Last week, Alphabet said cash flow turned negative for the first time on record, a stunning development for one of the most profitable companies on the planet.
Alphabet finance chief Anat Ashkenazi told analysts on the earnings call that free cash flow will remain under pressure as the company seizes on the "AI opportunity."
With tech earnings season largely wrapping up this week — Nvidia is set to report on Aug. 26 — it's become readily apparent that AI investments are distorting balance sheets, even as industry leaders continue to tout the future benefits of their mammoth bets on new data centers, and the chips and systems that populate them.
One big reason that costs are rising more than previously expected is the memory crunch, caused by insatiable demand for AI processors that rely on memory supplied by a small set of vendors.
Tesla CEO Elon Musk described memory pricing as "insane" on the automaker's earnings call last week, and Amazon CEO Andy Jassy said the "inflated price" of memory chips drove his company's capex guidance higher.
Apple , which is spending far less than its Big Tech peers, is particularly susceptible to the memory crisis because the technology is a key piece of every consumer device. Apple has already raised prices on Macs and iPads, and many analysts expect iPhone price hikes later this year.