Big Tech loses nearly $900 billion as AI costs unnerve investors

Investors wiped almost $900 billion from the market value of the largest US technology companies on Thursday, 23 July, as concern over the cost of the artificial intelligence race overwhelmed otherwise strong revenue growth.

The Bloomberg Magnificent Seven Index fell about 4.8% during the session, erasing roughly $767 billion at that stage. Later estimates placed the group’s combined loss at about $890 billion as selling intensified. Alphabet and Tesla accounted for much of the decline.

Alphabet shares fell about 7%, wiping more than $290 billion from its value, after the Google parent reported negative quarterly free cash flow for the first time since its public listing. Its cash outflow reflected rapidly rising investment in data centers, chips and other infrastructure needed to train and run AI models.

Tesla lost about 15% after weaker earnings and an acceleration in spending on autonomous vehicles, robotics, AI computing and semiconductor manufacturing. The company reported a steep increase in capital expenditure while operating margins narrowed.

The sell-off marked a change in the way investors are assessing AI spending. For much of the past three years, announcements of larger capital budgets were treated as evidence that technology companies expected enormous demand. Investors are now asking when those investments will produce sufficient revenue and cash flow.

The concern is not that AI demand has disappeared. Alphabet’s cloud business continues to expand, while companies are spending heavily on AI services and computing capacity. The question is whether that growth can keep pace with the billions of dollars being committed to infrastructure.

The scrutiny is likely to shift next to Microsoft, Meta Platforms and Amazon as they report results. Microsoft has so far remained better placed than many rivals to fund AI investment while generating positive cash flow, but expectations for all three companies are unusually high.

The wider market reaction also reflected the concentrated weight of the largest technology groups in US indices. When Alphabet, Tesla, Nvidia, Meta, Microsoft, Amazon and Apple fall together, their size can pull the Nasdaq and S&P 500 lower even when most listed companies suffer more modest moves.

Thursday’s losses do not necessarily mark the end of the AI trade. They do, however, suggest investors are no longer willing to reward spending without a clearer path to returns, analysts said.