Fears over $828 billion AI capex spending spree help erase $1 trillion in market value

The richest companies in the history of the world are spending so much on the infrastructure backing AI that they’re burning through billions in cash and threatening a recent AI-fueled stock surge as Wall Street wavers.

The latest financial disclosures by four of the biggest hyperscalers, Amazon, Alphabet, Microsoft, and Meta, as well as Elon Musk’s up-and-coming AI player, SpaceX, which includes xAI, revealed that the small group of tech heavyweights is set to invest as much as $828 billion on capital expenditures this year. That spending includes data centers, high-powered chips, and other infrastructure that fuels AI.

Making up the $828 billion in capex spending is an expected spend for 2026 of $220 billion from Amazon, up to $205 billion from Alphabet, approximately $170 billion from Microsoft, up to $145 billion from Meta, and up to $88 billion from SpaceX, according to company earnings releases and calls.

At this point, the massive AI infrastructure bill has surpassed the market value of well-known businesses like energy giant ExxonMobil or payments company Mastercard and is even approaching the roughly $1 trillion America is spending on defense this fiscal year, itself the largest in the world. Several banks, including Evercore and Bank of America, see capital expenditure related to AI hitting $1 trillion in 2027.

Partly in response to this massive spending, stocks tumbled on Friday, leading both the Nasdaq and the S&P 500 to their worst one-day performances since June. The tech-heavy Nasdaq closed down 2.9%, while the S&P 500 fell 1.8%. Nasdaq 100 companies lost more than $1 trillion in market value. Sour guidance for the last three months of the year from U.S. chipmaker Intel also played a role.

Some of the market’s jitters can be drawn to concerns over free cash flow, which has long been a source of strength for Silicon Valley companies but has recently taken a turn. Four of the five tech giants spending hundreds of billions cumulatively on capex had negative free cash flow in the third quarter (Microsoft was the exception), meaning they spent more on buildings, equipment, and other capital investments than they generated in cash from their operations.

As companies that built their fortunes selling software and services increasingly pour money into physical infrastructure they are looking to borrow or raise more in some cases to pay for it. With a handful of technology stocks accounting for an outsized share of the S&P 500, the success or failure of these companies’ investments could have enormous implications for the market and the millions of Americans invested in it.

Aleksandar Tomic, an economist and the associate dean at Boston College, warned that these infrastructure investments could lead to consequences far beyond Silicon Valley if they don’t pan out, especially as companies increasingly rely on debt to finance their expansion. This increased borrowing could raise the cost of capital for other businesses, while a downturn among the tech giants could ripple throughout the broader economy.

“If these tech companies sneeze, the rest of the market would catch pneumonia,” Tomic told Fortune.

Microsoft’s recent financials show how keeping up in the AI race is affecting tech companies’ decisions overall.

For decades, the software giant has been one of the world’s biggest cash-generating businesses. It earned nearly $134 billion in profit during its latest fiscal year and generated almost $183 billion in cash from operations. Still, during the same period, its cash spending on property and equipment rose about 80%.

Microsoft announced a $25 billion bond offering Thursday, its first bond sale in more than nine years. The company said it would use the money for general corporate purposes, which it said could include capital expenditures.