Big Tech is investing a record $725 billion in AI projects, leaving the combined free cash flow of Amazon, Google, Microsoft and Meta to fall a projected $4 billion during the third quarter, the Financial Times (FT) reported Friday.
That’s down from an average of $45 billion in each quarter since the pandemic, the report added. These companies’ full-year free cash flow is on track to fall to the lowest level since 2014, when their revenues were around one-seventh of their current size, the FT said citing analysts’ estimates compiled by Visible Alpha.
“This is the deepest industrywide capex cycle they have had,” said Justin Post, an internet analyst for Bank of America. “They see it as a once in a lifetime opportunity.”
As the FT noted, the free cash flow metric gauges of the cash companies have left to service debt or return to shareholders after operating costs and capital spending are covered.
According to the report, Amazon is projected to spend more cash than it brings in this year. Meta will burn through cash during the latter half of the year, with Microsoft expected to do the same in at least one quarter, the FT added. Analysts expect that Google-parent Alphabet’s free cash flow will remain positive but dip to its lowest level in more than a decade.
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During the first few years of the AI boom, the report said, Big Tech companies primarily used their income to finance investments. Now, these companies are dealing with trade-offs found at more capital-intensive businesses: slashing jobs, cutting shareholder returns or borrowing to pay for their AI efforts.
In other AI news, PYMNTS wrote last week about new personal AI agents from Google and Meta – Remy and Hatch, respectively – and the edge they have over OpenClaw: they’re both part of the two companies’ existing apps.
That positioning is in line with where consumer behavior is moving. PYMNTS Intelligence research shows that more than 60% of consumers in the United States had used a dedicated AI platform in the past year.
“Neither Google nor Meta face the cost problem that ended OpenClaw’s cheap access,” PYMNTS added.
“Both own the computing infrastructure that their assistants run on. When Anthropic raised the price of running OpenClaw, millions of users were left without an affordable option. Google and Meta are building for exactly that audience into the places those users already are.”
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