AI capital spending by US Big Tech companies is forecast to exceed $1.3 trillion by 2029, according to a report from the Hyundai Research Institute released on the 15th.
That total contrasts sharply with the combined free cash flow of Alphabet, Amazon, Meta, Microsoft, and Oracle over the past four quarters, which dropped to $32.7 billion. That figure is down about 84% from $201.1 billion a year earlier.
The sources reported that Amazon, Alphabet, Meta, Microsoft, and Oracle collectively spent $230 billion on capital expenditure in the third quarter of 2026 alone. That amount is more than double the capital expenditure recorded by the five firms during the same period a year earlier.
Binance Research said that the combined operating cash flow for the five companies stood at $199 billion. That left their combined free cash flow at negative $32 billion, reversing a $61 billion surplus from a year ago.
Cash Flow Pressures
The capital expenditure of the five major technology companies reached 95.5% of their operating cash flow in the third quarter. In that quarter, every company in the group except Microsoft posted negative free cash flow.
Amazon maintained its capital expenditure outlook for the year at around $220 billion. Alphabet projected spending between $195 billion and $205 billion, with another large increase expected in 2027.
Investors responded cautiously to the rising outlays and shrinking cash reserves. Alphabet shares dropped 12.6% following its financial results, while Meta shares fell 7%.
Borrowing costs have also begun to diverge across the sector. The yield spread between recently issued corporate bonds and the 10-year US Treasury yield sits at 0.65 percentage points for Microsoft, while Oracle’s spread widened from 1.45 percentage points in February to 3.10 percentage points in this month.
Corporate Bond Issuance Grows as Infrastructure Limits Expansion
External debt financing has accelerated to cover the spending gap. Corporate bond issuance by the five firms reached $182 billion between January and October, doubling the $93.25 billion issued during the entirety of the previous year. Binance Research tracked total AI-related US dollar bond issuance at roughly $419 billion by mid-October.
Infrastructure limitations pose an additional hurdle for data center expansion. About 70% of announced US data center construction plans, measured by capacity, have not yet broken ground.
Power supply shortages and rising prices for memory chips continue to swell project budgets. Furthermore, 38.4% of total planned capacity is concentrated in Texas, Georgia, and Ohio, where tighter regulations have drawn increased scrutiny.
Adoption rates among corporate users remain narrow despite the heavy infrastructure spending. Data from the US Census Bureau shows that only 24.6% of American companies were using AI as of last month, with 57% of those adopters applying the technology to three or fewer business functions.
Correction Phase Timeline
The Hyundai Research Institute evaluated AI investment across five conditions, concluding that demand and profitability will remain sound through 2027 and 2028. However, the institute assessed that financial health and regulatory conditions will deteriorate to unfavorable levels, while financing conditions will slip to neutral.
The investment cycle could enter a correction phase around 2028 as these burdens converge. Companies are expected to postpone expansion plans or scale back spending on a case-by-case basis as the market adjusts to actual demand.
“We Must Prepare for a Possible Correction in the US AI Investment Boom” was the title of a report from the Hyundai Research Institute released on the 15th said the institute.
What the Data Shows About Bond Issuance and Share Prices
What was the total corporate bond issuance for Big Tech?
The five major technology companies issued $182 billion in corporate bonds between January and October. Binance Research tracked total AI-related US dollar bond issuance at roughly $419 billion by mid-October.
How much did equity shares drop for Alphabet and Meta?
Alphabet shares dropped 12.6% after its earnings results, and Meta shares fell 7% as both companies raised their spending forecasts despite negative free cash flow.
What percentage of US companies use artificial intelligence?
Only 24.6% of American companies were using AI as of last month, according to data from the US Census Bureau.
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