U.S. tech giants' AI infrastructure spending is expected to reach $740 billion this year, with high interest rates posing a major risk to AI stock gains

Odaily News: Alphabet, Amazon, Meta, and Microsoft are expected to spend a combined $740 billion on AI computing infrastructure in 2026, potentially rising to $1 trillion by 2027. As capital expenditures grow rapidly, some tech giants are shifting from relying on their own cash flow to debt and equity financing, while persistently high U.S. long-term interest rates are becoming a key risk to AI stock valuations.

Among them, Alphabet reported its first negative free cash flow since going public in the second quarter, while Amazon's free cash flow is projected to be -$23.5 billion and -$36.2 billion this year and next, respectively. However, earnings at AI-related companies remain strong, with S&P 500 information technology sector profits expected to grow 71% year-over-year in the second quarter. The market believes that if corporate earnings and the economy continue to show resilience, high interest rate pressures may still be absorbed, but if rates rise rapidly, high-valuation AI and tech stocks will be more vulnerable to shocks. (Bloomberg)