Tech Stocks Fall 7% on Wall Street Amid AI Concerns

Tech stocks on Wall Street have declined by 7% over the past month, reflecting concerns about valuations and free cash flow. Major companies in the sector, such as Amazon, Alphabet, Meta, and Microsoft, are increasing their investments in artificial intelligence (AI) but are generating less cash. An analysis by The Kobeissi Letter revealed that their capital expenditures (capex) rose by $36.9 billion in the third quarter, reaching a total of $201.9 billion, more than double compared to a year ago and a 356% increase from the first quarter of 2024. However, the combined free cash flow of these companies fell by $33.1 billion in the last quarter, resulting in a negative balance of -$26.4 billion, the lowest recorded. Over the past year, the combined free cash flow decreased by $88.2 billion. Only Microsoft managed to maintain a positive result in the third quarter. Companies plan to allocate another $232 billion to capital investments in the fourth quarter, which has reignited doubts about the profitability of their bets on AI. Last Friday's correction resulted in a loss of over $1 trillion in market capitalization for the sector. Investors are now demanding financial results that justify the magnitude of investments in AI.

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