Bigger Pumps Needed to Keep the AI Bubble Inflated

"Negative free cash flow" means your costs are growing faster than your revenue.  If you retreat and draw down the insane levels of spending on data centers, then everyone will know it’s time to cash out. Can’t do that. So you just keep pumping.  

From the NYTimes:

. . . . Across this year and next, Amazon, Google, Meta and Microsoft are expected to spend a staggering $1.5 trillion building data centers and stuffing them with advanced chips, according to Wall Street estimates compiled by FactSet.

“The scale of it is nuts,” said Melissa Otto, who leads research at S&P Global’s Visible Alpha division.

Alarms are rising as Wall Street and others question whether this spending can be justified. On Thursday, shares of Microsoft, which did not change its spending forecast, jumped more than 15 percent, but Meta’s stock sank more than 7 percent after it revealed its A.I. outlays and that costs were growing faster than its revenue.

And last week, for the first time since going public in 2004, Google said it had “negative free cash flow,” which meant it was spending more on day-to-day operations and building new infrastructure than it was taking in from its businesses. Google’s stock fell more than 6 percent the next day. . . .