{"id":37852,"date":"2025-10-26T23:56:00","date_gmt":"2025-10-26T15:56:00","guid":{"rendered":"https:\/\/www.granitefirm.com\/blog\/us\/?p=37852"},"modified":"2025-10-31T12:33:17","modified_gmt":"2025-10-31T04:33:17","slug":"ai-jeopardizes-cash","status":"publish","type":"post","link":"https:\/\/www.granitefirm.com\/blog\/us\/2025\/10\/26\/ai-jeopardizes-cash\/","title":{"rendered":"AI jeopardizes cash flow and profits"},"content":{"rendered":"\n<p>All current indicators clearly point to &#8220;AI jeopardizes cash flow and profits&#8221;. This will impact companies&#8217; AI strategies, spending, and investor sentiment regarding their stocks.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #ffffff;color:#ffffff\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #ffffff;color:#ffffff\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/10\/26\/ai-jeopardizes-cash\/#Cash_Generators_Begin_to_Fade\" >Cash Generators Begin to Fade<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/10\/26\/ai-jeopardizes-cash\/#From_Light_Assets_to_Cash_Generators\" >From Light Assets to Cash Generators<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/10\/26\/ai-jeopardizes-cash\/#The_numbers_speak_for_themselves\" >The numbers speak for themselves<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/10\/26\/ai-jeopardizes-cash\/#Examples_of_Two_Companies\" >Examples of Two Companies<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/10\/26\/ai-jeopardizes-cash\/#Long-term_concerns_remain\" >Long-term concerns remain<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/10\/26\/ai-jeopardizes-cash\/#CapEx_squeeze_cash_flow_and_shareholder_returns\" >CapEx squeeze cash flow and shareholder returns<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/10\/26\/ai-jeopardizes-cash\/#Meta_jumps_out\" >Meta jumps out<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/10\/26\/ai-jeopardizes-cash\/#Making_Money_While_Laying_Off_Employees\" >Making Money While Laying Off Employees<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/10\/26\/ai-jeopardizes-cash\/#Free_cash_flow_declined_across_tech_giants\" >Free cash flow declined across tech giants<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/10\/26\/ai-jeopardizes-cash\/#Two_extremes\" >Two extremes<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/10\/26\/ai-jeopardizes-cash\/#Conclusion\" >Conclusion<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/10\/26\/ai-jeopardizes-cash\/#Related_articles\" >Related articles<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Cash_Generators_Begin_to_Fade\"><\/span>Cash Generators Begin to Fade<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"From_Light_Assets_to_Cash_Generators\"><\/span>From Light Assets to Cash Generators<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>From 2016 to 2023, US tech giants clearly lived up to the asset-light model\u2014the free cash flow and net income of Alphabet, Amazon, Meta, and Microsoft grew roughly in tandem during this period.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"The_numbers_speak_for_themselves\"><\/span>The numbers speak for themselves<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>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&#8217;s relatively conservative capital expenditures, its free cash flow has also begun to lag behind net income growth.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Examples_of_Two_Companies\"><\/span>Examples of Two Companies<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Meta&#8217;s second-quarter 2025 earnings report showed 36% growth, but its free cash flow declined 22%.<\/p>\n\n\n\n<p>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.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Long-term_concerns_remain\"><\/span>Long-term concerns remain<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"CapEx_squeeze_cash_flow_and_shareholder_returns\"><\/span>CapEx squeeze cash flow and shareholder returns<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The market is concerned that if these massive capital expenditures prove excessive, they will squeeze shareholder cash returns, such as dividends and buybacks.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Meta_jumps_out\"><\/span>Meta jumps out<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><a href=\"https:\/\/www.reuters.com\/business\/meta-seeks-29-billion-private-capital-firms-ai-data-centers-ft-reports-2025-06-27\/\" target=\"_blank\" rel=\"noopener\">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<\/a>. Meta Platforms is accelerating the transformation of AI infrastructure. <a href=\"https:\/\/www.aol.com\/finance\/zuckerberg-says-meta-needs-careful-124636902.html\" target=\"_blank\" rel=\"noopener\">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 &#8220;held for sale,&#8221; <\/a>with the intention of transferring them to a third party within the next 12 months as part of a joint data center development effort.<\/p>\n\n\n\n<p>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.<\/p>\n\n\n\n<p>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.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Making_Money_While_Laying_Off_Employees\"><\/span>Making Money While Laying Off Employees<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>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.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Free_cash_flow_declined_across_tech_giants\"><\/span>Free cash flow declined across tech giants<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>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.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Two_extremes\"><\/span>Two extremes<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>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.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>As long as core revenue and profits continue to soar, investors will support and applaud tech companies&#8217; massive bets on AI; the market may even penalize laggards with share price penalties.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"138\" height=\"90\" src=\"https:\/\/www.granitefirm.com\/blog\/us\/wp-content\/uploads\/sites\/2\/2025\/11\/AI_cashflow-Custom.jpg\" alt=\"AI jeopardizes cash flow and profits\" class=\"wp-image-37854\"\/><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Related_articles\"><\/span>Related articles<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/10\/30\/ai-strategy-are-shifting\/\">Tech giants&#8217; 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I am not responsible for the correctness, opinions, and immediacy of the content and information of the article. Readers must make their own judgments.<\/em><\/li>\n\n\n\n<li><em>I shall not be liable for any damages or other legal liabilities for the direct or indirect losses caused by the readers&#8217; direct or indirect reliance on and reference to the information on this site, or all the responsibilities arising therefrom, as a result of any investment behavior.<\/em><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>AI jeopardizes cash flow and profits. The market is concerned that if these massive capital expenditures prove excessive, they will squeeze shareholder cash returns, such as dividends and buybacks.<\/p>\n","protected":false},"author":1,"featured_media":37854,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[104,180,1305,388],"tags":[],"class_list":["post-37852","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-artificial-intelligence","category-cash-flow","category-diversified-conglomerate-group","category-free-cash-flow"],"_links":{"self":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/37852","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/comments?post=37852"}],"version-history":[{"count":9,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/37852\/revisions"}],"predecessor-version":[{"id":39692,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/37852\/revisions\/39692"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/media\/37854"}],"wp:attachment":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/media?parent=37852"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/categories?post=37852"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/tags?post=37852"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}