The four horsemen of the internet economy are about to spend an absolutely bonkers amount of money this year. We’re talking $700 billion combined. That’s not a typo. Alphabet, Microsoft, Meta, and Amazon are opening their wallets wider than ever before to chase the AI dream.
For context, that’s more than the GDP of most countries. And it represents a 60% jump from what were already historic spending levels in 2025. The technology giants are buying chips by the truckload, constructing massive data centers that probably have their own zip codes, and snapping up networking equipment like it’s going out of style.
The Free Cash Flow Massacre
Here’s where things get interesting. Or terrifying, depending on your perspective. Last year, these four companies generated $200 billion in free cash flow. That’s already down from $237 billion the year before. But 2026? Hold onto your hats.
Amazon is staring down the barrel of negative free cash flow to the tune of $17 billion according to Morgan Stanley, though Bank of America thinks it could be worse at $28 billion. The company just announced a $200 billion spending plan for this year. That’s real money, even for Jeff Bezos’s old shop.
Alphabet might have it even rougher. Pivotal Research expects their free cash flow to nosedive almost 90% this year, dropping from $73.3 billion to a measly $8.2 billion. That’s the kind of number that makes CFOs wake up in cold sweats.
Meta’s in the same boat, with Barclays predicting a similar 90% crash in free cash flow. The real kicker? Those same analysts think Meta will actually hit negative free cash flow in 2027 and 2028. They’re literally saying “this is shocking to us” while maintaining a buy rating. Wall Street logic at its finest.
Debt Becomes Less Dirty
Remember when tech companies bragged about their fortress balance sheets? Those days are fading fast. Alphabet just did a $25 billion bond sale in November. Their long-term debt quadrupled in 2025 to $46.5 billion. Amazon even filed paperwork with the SEC saying hey, we might need to raise some equity and debt as this whole AI thing continues.
The market hasn’t exactly been thrilled about all this spending. Amazon’s stock dropped 6% after earnings and is down 9% for the year. Microsoft is getting hammered the worst, down 17%. At least Alphabet and Meta are up slightly, though not by much.
Jake Dollarhide from Longbow Asset Management isn’t worried though. He’s got Amazon as his biggest holding and Alphabet at number four. His take is pretty straightforward: “If you’re going to pour all this money into AI, it’s going to reduce your free cash flow.” Fair enough. That’s why executives make the big bucks, right?
The Justification Game
So what’s the pitch here? Why are these companies willing to torch their cash generation in the near term? The answer is cloud computing and AI infrastructure. They’re all betting that business demand for AI compute will be absolutely massive.
Andy Jassy at Amazon pointed out that AWS growth was the fastest they’d seen in 13 quarters. Morgan Stanley’s Brian Nowak says Alphabet is seeing real returns on Google Cloud, Search, and YouTube. The narrative is that companies everywhere are building AI agents and applications, and all of that needs compute power.
Deutsche Bank called Alphabet’s infrastructure build-out a “meaningful moat.” That’s Wall Street speak for competitive advantage. The idea is that only companies with deep pockets can play this game at scale. OpenAI and Anthropic might be hot startups, but they don’t have $420 billion in cash sitting around like the big four do.
The Trillion Dollar Question
Daniel Newman from Futurum Group says businesses are building on these platforms because they’re “core technologies.” That’s probably true. But Michael Nathanson from MoffettNathanson brings up a good point: “We’re at the dawn of a new technology shift and it’s really hard to know the sustainability of top line.”
Translation: nobody really knows if all this spending will pay off.
There’s also the OpenAI factor. That company has announced over $1.4 trillion in AI deals. If something goes sideways there, it could create contagion across the entire AI ecosystem. These four giants are basically making a leveraged bet that the AI revolution will be as transformative as they think it will be.
Morgan Stanley thinks Alphabet could be spending up to $250 billion in 2027. Microsoft’s spending is growing more slowly but still growing. Meta’s CFO basically said investing in AI is the “highest order priority” over everything else, including buybacks.
What we’re witnessing is potentially the biggest capital deployment in tech history, all based on the belief that AI will generate trillions in revenue down the line. Either this generation of CEOs will look like visionaries in a few years, or they’ll have burned through hundreds of billions chasing a market that never quite materialized at the scale they expected.
