Major technology companies will need to raise hundreds of billions of dollars this year to support their soaring investments in artificial intelligence. Even for some of the world's most profitable firms, the growth in capital expenditures is now outpacing the rate of cash inflow.

Over the past two weeks, the scale of AI investment plans announced by Alphabet, Amazon.com, and Meta Platforms, Inc. has taken investors by surprise. More than $660 billion is set to be invested this year in chips and data center construction, as companies race to establish dominance in what many in Silicon Valley see as the largest wave of innovation since the internet.

Analysts indicate that this unprecedented infrastructure expansion will force executives at large tech firms to make difficult choices: reduce capital returns to shareholders, draw down cash reserves, or enter debt and equity markets more aggressively than previously planned.

JPMorgan analysts stated, "The boost to high-grade bond issuance is evident." They project that technology and media companies will issue at least $337 billion in investment-grade bonds this year.

Due to investor unease over massive capital expenditure plans and concerns about when these investments will yield returns, major tech stocks have declined noticeably in recent days, though some rebounded on Friday.

Amazon.com indicated in a regulatory filing on Friday that it may soon seek new funding through debt or equity, though it did not specify the amount or timing. Following the announcement, its stock closed down 5.6% for the day. According to S&P Capital IQ estimates, the company's planned $200 billion in capital expenditures for this year could exceed its approximately $180 billion in operating cash flow.

Oracle raised $25 billion through a bond issuance last week to support its significant bets in AI, alleviating investor concerns about how it would finance a $300 billion computing deal with OpenAI, the still-unprofitable developer of ChatGPT.

TD Securities analysts suggested that investment-grade corporate bond issuance could reach as high as $80 billion in the coming week, double the "seasonal norm," potentially driven by "jumbo-sized transactions" from companies like Amazon.com, Meta Platforms, Inc., and Alphabet.

TD noted in a client report that U.S. investment-grade credit spreads have recently widened as markets anticipate a wave of financing from large tech companies.

The enormous investment required to build new facilities for training and running AI systems like ChatGPT, Google Gemini, and Anthropic Claude is beginning to overshadow the profits of these traditionally strong cash-generating businesses.

Analysts at BNP Paribas stated that the free cash flow of Oracle, Alphabet, Amazon.com, and Meta Platforms, Inc. is starting to "slide rapidly into negative territory," adding that "only Microsoft appears more resilient, at least for now."

Meta Platforms, Inc. expects capital expenditures to reach up to $135 billion this year, while analysts project its operating cash flow to be around $130 billion. The parent company of Facebook and Instagram issued $30 billion in bonds last October, marking the largest bond offering in its history.

Alphabet is expected to generate $195 billion in operating cash flow to cover its approximately $185 billion capital expenditure plan, but it must also fund stock buybacks and dividends. Its long-term debt has increased from $10.9 billion in 2024 to $46.5 billion last year, though it ended the year with $126.8 billion in cash and equivalents.

Russ Mould, Investment Director at broker AJ Bell, commented that markets are concerned these internet conglomerates are shifting "from a capital-light business model to a capital-intensive one," which has recently weighed on tech stock performance and made their cash flows "less clear and harder to predict than before."

He pointed out, "Capital expenditure growth at AI-focused tech companies is far outstripping sales growth. The initial signs are greater use of debt financing and cuts to share buyback programs. A reduction in this kind of 'generosity' to shareholders weakens short-term returns for holding the stock."