Don’t be lenient in spending money on AI! Meta and 3 technology giants all have negative "free cash flow"

The US news website "Axios" reported that the massive investment in data centers has made Meta join the ranks of technology giants such as Amazon, Alphabet and Oracle. It has been reduced from the most cash-generating company in US history to a member of the "negative free cash flow club".

After Mark Zuckerberg (Mark Zuckerberg) Meta announced a very strong financial report on the 22nd, the stock price plummeted, falling by more than 9% in the past week, indicating that investors are increasingly uneasy about the technology giant continuing to invest more and more funds in the construction of data centers.

Although Meta's revenue and adjusted net profit exceeded Wall Street expectations, the company also raised the lower end of its forecast range for capital expenditures this year and delayed the announcement of its 2027 financial forecast. Meta vowed, "We expect we will continue to invest aggressively."

Meta's spending spree has completely changed the company's cash flow situation, turning it from one of the most cash-generating companies in the history of the United States to one with negative cash flow in the third quarter. Meta is of course not an isolated case. The expansion of artificial intelligence (AI) has also had a similar impact on other very large cloud service providers Amazon, Alphabet and Oracle.

But this does not mean that Meta’s capital position is dangerously low. The financial report shows that Meta holds more than $82 billion in cash and marketable securities.

According to reports, Meta is creating a new stock class to raise more funds without reducing founder Zuckerberg's control of the company.

Although Meta has not announced any new capital plans, the decision to issue non-voting Class C common stock in January next year will dilute the economic value of the shares held by existing shareholders. Meta could also raise debt in the bond market, but this would also increase risks.

Whether the AI ​​craze that has boosted the stock market can be sustained depends on whether capital markets can provide financing on a large scale, so the market reaction to the decline in AI-related stocks in the past week shows that investor doubts are increasing, which is crucial.