The biggest names in tech spent the last week of October explaining how they plan to continue paying for artificial intelligence. Leaders from Elon Musk to Andy Jassy use earnings calls and public speeches to talk about spending, cash flow and who might be left behind. The discussion is not about what AI can do, but who can afford it.
Investors didn’t like what they heard, and some of them rushed to clarify. Alphabet suffered a sharp sell-off after releasing earnings on October 28, with its stock price falling more than 8% in after-hours trading. Growth is real. The same goes for bills.
Elon Musk believes that New Cloud is about to undergo a reshuffle
Elon Musk set the tone on October 25, issuing a warning to Neoclouds, a company that rents out artificial intelligence computing power. More than 200 of them, he wrote on X, faced “guppy-level death and consolidation,” with few surviving.
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His argument comes down to debt. Lenders are wary of backing companies that derive nearly all of their revenue from artificial intelligence data centers, he said. SpaceX has taken on about $40 billion in debt to buy GPUs, but it also makes money through Starlink and rocket launches. In his view, external business is the most important.
Some traders interpreted the comments as a sign that Musk might be looking to buy dips in battered New Cloud stock. He quickly dismissed the idea, saying SpaceX had no intention of buying either, calling it “pointless,” according to Reuters. In other words, he expected the weaker names to disappear on their own rather than be saved.
At the same time, there is still room for larger companies to borrow. Microsoft Chief Financial Officer Amy Hood said the company is fortunate to have access to debt markets and has many financing options when conditions are right. Leasing is one of the tools it is using, and Hood still expects Microsoft to remain free cash flow positive through fiscal 2027.
Meta raises cash after Nvidia steps in
Meta has chosen a different path to fund its AI ambitions. On October 26, the company raised $25 billion by issuing 40 million Class A shares at $625 per share, up from the $22.5 billion planned at the time of the offering. According to Reuters, the number of orders was roughly five times the number of shares offered.
The spending behind the raises explains the rush. Meta’s capital expenditures last quarter were about $35 billion, exceeding its operating cash flow of about $33 billion and causing free cash flow to fall to negative $2.1 billion for the first time since 2012.
Nvidia is investing $3 billion in Meta’s products, and the two companies are expanding their partnership. According to TheStreet, Meta plans to use more Nvidia Vera Rubin systems, Vera CPUs, and Spectrum-X networks in its next wave of AI agents, and the two companies will work to reduce the cost of training and running Meta’s Muse models. The chipmaker is starting to look like both a supplier and a customer advocate.
Huang has tougher questions to answer. On October 29, it was reported that U.S. authorities had begun investigating a former Megaspeed executive after he said Nvidia’s business with Singapore-based Megaspeed International was normal.
He said Nvidia had checked that its chips were not being shipped illegally to China and that his talks with the former executive were typical of those with Chinese customers, according to Bloomberg.
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Alphabet and Microsoft show the cost of growth
Alphabet’s quarter showed both sides of the AI trade. Google Cloud’s revenue more than doubled from the same period last year to approximately $30.7 billion, but free cash flow was negative $9.1 billion as capital expenditures exceeded operating cash flow. Earnings per share also came in significantly below expectations.
Capital expenditure is the cause of the stress. Alphabet spent about $51.4 billion this quarter and has a full-year spending target of $195 billion to $205 billion.
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Microsoft has had a smoother week than most companies. Revenue grew 19% to $92.3 billion, Azure grew 48%, beating expectations, and capital expenditures reached $39.4 billion. Microsoft said Satya Nadella described enterprise artificial intelligence adoption as a long-term opportunity rather than a quick quarterly improvement.
Amazon bets demand will keep up
Andy Jassy sounds the most confident of the entire team. AWS grew 39.3% in the third quarter, the fastest growth in the past five years, and its order backlog reached $578 billion. According to Amazon reports, Amazon now installs an AI accelerator approximately every 14 seconds, with customers acquiring new capacity almost as fast as it comes online.
The cost of this confidence is huge. According to TheStreet, Amazon raised its full-year capital expenditure forecast for 2026 to about $220 billion, and Jassy said expenditure will grow significantly in 2027. Jassy also said the AWS investment should lead to a much larger revenue and free cash flow business than the company expected just a few years ago.
All in all, this week drew a clear line. Giants can still raise money and keep growing, while smaller businesses with no other revenue may struggle to keep up, a divergence Musk spelled out when he said debt markets were essentially closed to them. Currently, Wall Street seems willing to reward growth only if the cash position holds.
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