Money to burn? Big Tech’s AI splurge is blowing out

July 23, 2026 — 12:01pm

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Amid a raft of impressive numbers in Alphabet’s second-quarter results, one stands out. While quadrupling its profits, Google’s parent company reported the first quarter of negative free cash flow in its history.

The apparent massive lift in profit overstated Alphabet’s operating performance by including a $US98 billion ($140 billion) non-cash mark-up in the value of its investments in SpaceX and Anthropic, but the cash-burn in the quarter was very real.

It has become a common feature of big technology companies’ results as they plough ever-increasing amounts of cash and capital into artificial intelligence.

In fact, both of those features of Alphabet’s numbers are common to the “hyperscalers” chasing their places in an AI-dominated future and share a common thread: the demands for capital to fund AI developments outstrip the ability of the companies to fund them internally.

Increasingly, even the biggest tech companies are calling on debt markets, raising equity from the sharemarket and investing in their rivals to create daisy chains of mutual dependence – and vulnerability.

The demands aren’t diminishing. Alphabet had capital expenditures of $US44.9 billion in the quarter – more than double the amount invested the same quarter of last year, and about 25 per cent more than it spent in the first quarter.

The falls in Alphabet and Tesla’s share prices after their results suggest that investors’ patience and tolerance for the ever-escalating costs of their AI plans are starting to wane.

It had previously forecast capex of $US180 billion to $US190 billion for the full year, but has........

© The Sydney Morning Herald