Big Tech companies’ capital expenditure (capex) on AI has become so large that it is at risk of making some companies go cash-flow negative, a “red flag” for stock valuations, according to analysts at Evercore ISI.
Nervousness about the effect of AI on the stock market has led to a high level of volatility in the S&P 500 year to date, as investors alternately bid up tech stocks based on positive quarterly earnings reports and then sell them off on speculation about AI’s ability to destroy their underlying businesses.
Meta is expected to devote $55 billion to AI capex this year; Alphabet said it would double capex to $180 billion; and Amazon guided a 50% increase to $200 billion, according to Evercore’s Julian Emanuel and his colleagues. (Wells Fargo previously estimated AI capex across the sector would be up 24% for 2026; Evercore puts that at about $650 billion over the next 12 months.)
“Increasing capex is forcing companies to spend significantly more of their cash flows, and raise debt, to continue investing for the future. Debt-driven expansion has sent jitters through the market, but signs of AI systemic risks still remain largely absent. Broadly, leverage continues to remain healthy,” Emanuel and his team advised clients.
