Amazon.com IncHyperscaler free cash flow projected to turn negative this year, threatening AI capex and profitability.
Apollo chief economist Torsten Slok warns that the spread of Chinese AI models and declining token prices could derail profitability for AI firms and trigger a market correction. Hyperscalers Amazon, Alphabet, Meta, Microsoft, and Oracle generated a record $260 billion in free cash flow in 2024 but are projected to turn negative this year, while chipmakers Nvidia, Micron, Broadcom, and Applied Materials are expected to generate $430 billion in free cash flow over the next 12 months. Slok notes that Chinese firms like DeepSeek and Moonshot AI are gaining ground by offering similar features at lower cost, and companies are increasingly seeking to cut token spending. If hyperscaler cash flows fall short, the outsized weight of the Magnificent Seven in the S&P 500 could drag equity markets into a correction or even a recession.
Amazon.com IncHyperscaler free cash flow projected to turn negative this year, threatening AI capex and profitability.
Alphabet Inc Class CHyperscaler free cash flow projected to turn negative this year, threatening AI capex and profitability.
Meta Platforms Inc.Hyperscaler free cash flow projected to turn negative this year, threatening AI capex and profitability.
NVIDIA CorporationNvidia's AI chip demand is threatened by falling token prices and Chinese AI competition, which could reduce hyperscaler spending on its GPUs.
Microsoft CorporationHyperscalers like Microsoft are projected to turn free cash flow negative this year, and falling token prices and Chinese AI competition threaten demand for their AI services.
Broadcom IncChinese AI competition and token price declines could reduce demand for Broadcom's chips.
Applied Materials IncChinese AI gains and falling token prices may reduce demand for chipmaking equipment as AI spending slows.
Micron Technology IncMicron, as a chipmaker, faces risk from declining token prices and hyperscaler cash flow shortfalls, which could reduce demand for memory chips used in AI.
Oracle CorporationOracle, as a hyperscaler, is projected to turn free cash flow negative, and falling token prices and Chinese AI competition pressure its cloud AI business.
Apollo Global Management LLC Class A