All current indicators clearly point to “AI jeopardizes cash flow and profits”. This will impact companies’ AI strategies, spending, and investor sentiment regarding their stocks.
Cash Generators Begin to Fade
From Light Assets to Cash Generators
From 2016 to 2023, US tech giants clearly lived up to the asset-light model—the free cash flow and net income of Alphabet, Amazon, Meta, and Microsoft grew roughly in tandem during this period.
The numbers speak for themselves
However, since 2023, a clear divergence has emerged. According to FactSet data, during this period, the combined net income of these four companies increased 73% from two years prior to $91 billion, while free cash flow declined 30% to $40 billion. Despite Apple’s relatively conservative capital expenditures, its free cash flow has also begun to lag behind net income growth.
Examples of Two Companies
Meta’s second-quarter 2025 earnings report showed 36% growth, but its free cash flow declined 22%.
Amazon, on the other hand, began scaling back its construction of fulfillment centers (automated logistics facilities) in 2022, allowing it to return to free cash flow positive.
Long-term concerns remain
CapEx squeeze cash flow and shareholder returns
The market is concerned that if these massive capital expenditures prove excessive, they will squeeze shareholder cash returns, such as dividends and buybacks.
Meta jumps out
Meta announced at the end of June 2025 that it was seeking to raise $29 billion from private equity firms to build an AI data center. Meta Platforms is accelerating the transformation of AI infrastructure. On July 31, 2025, in its financial filing, it disclosed that it had approved a plan to list $2.04 billion worth of data center assets as “held for sale,” with the intention of transferring them to a third party within the next 12 months as part of a joint data center development effort.
Meta Platforms then finalized a major financing agreement on August 8, 2025, to fund its AI-driven infrastructure. The tech giant partnered with Pacific Investment Management Company (PIMCO) and Blue Owl Capital (OWL) to raise $29 billion for a massive data center expansion in rural Louisiana.
This strategy represents a significant shift in how the tech industry uses capital. As the computing power required for generative AI continues to soar, tech giants like Meta are seeking external funding to alleviate the pressure of raising capital internally.
Making Money While Laying Off Employees
With the exception of Apple, which has been less pronounced, the other four tech giants have been making significant layoffs while earning money to finance the staggering capital expenditures of the AI boom of the past three years. Investors welcome layoffs, as they generally offer immediate savings to companies. Tech giants are using the savings from mass layoffs to recruit talent with AI expertise.
Free cash flow declined across tech giants
In fact, with the exception of Microsoft, the free cash flow of the other four tech companies declined compared to the same period last year. Alphabet was the most significantly affected, with a 61% year-over-year drop in free cash flow and an 11% drop in cash returns.
Two extremes
Amazon currently has no shareholder cash return plan, while Apple, which launched its return plan in 2012, has already approached $1 trillion in total and is expected to surpass that milestone by the end of 2025.
Conclusion
As long as core revenue and profits continue to soar, investors will support and applaud tech companies’ massive bets on AI; the market may even penalize laggards with share price penalties.
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