Cracks are emerging in the AI spending boom

Big Tech companies are pouring billions into AI infrastructure, but investors are growing concerned about the sustainability of this spending boom due to mounting debt, negative cash flow, and waning enthusiasm for the investments. This concern is reflected in the stock market's decline, with the Nasdaq falling 2.9% and chip stocks plummeting. Google's parent company, Alphabet, reported negative free cash flow of $9.1 billion in the third quarter, its second consecutive quarter in the red, despite growing capital expenditures to $51.4 billion. The company expects to spend up to $205 billion this year, with spending expected to rise in 2027. This shift in investor sentiment and the decline in stock prices could have significant consequences for the tech industry, particularly for companies that have invested heavily in AI infrastructure.