Google sees its worst day in 20 years, but why it may not be alone

Google-parent Alphabet witnessed its worst stock market performance in more than 20 years on Thursday, October 29. The company’s shares plunged 12.6% following its latest earnings report. The decline wiped out around $500 billion in Alphabet's market value. Announcing the Q3 results, Alphabet said that it burned through more cash during the quarter, according to a measure called free cash flow, after its purchases of property and equipment topped $51 billion. However, the company may not be alone in facing investor concerns, as the massive cost of building AI infrastructure is putting pressure on the cash flow of major technology companies. Other tech giants, including Microsoft, Amazon, Meta and Oracle, are also committing billions of dollars to AI development, data centres and computing infrastructure.Why did Google's stock suffer its worst fall in 20 yearsAlphabet's Class A shares fell 12.6% on October 29, marking their worst single-day decline since they began trading more than two decades ago. The fall came after the company reported weaker-than-expected growth for the summer quarter, adding to concerns over its rising AI expenditure.According to the Associated Press, Alphabet's purchases of property and equipment crossed $51 billion during the latest quarter, while its free cash flow turned negative. Free cash flow refers to the money a company has left after paying for its operating expenses and capital investments. It is an important measure of how much cash a business can generate after funding its expansion.The concern is not limited to how much Google is spending, but also how quickly it can recover that money through its AI and cloud businesses. With major technology companies racing to build data centres and secure AI computing capacity, investors are increasingly looking at whether the returns from these investments can keep pace with the rising costs.Why Google's AI spending concerns may not be limited to AlphabetAs mentioned above, Alphabet is not the only technology company spending heavily to build AI infrastructure. Microsoft, Amazon, Meta and Oracle are also investing billions of dollars in data centres, servers, chips and cloud computing capacity to support their AI ambitions.A Reuters analysis published in July found that five major cloud infrastructure companies, Microsoft, Alphabet, Amazon, Meta and Oracle, could collectively spend more on capital expenditure than they generate in free cash flow by 2027, based on LSEG consensus estimates. The analysis estimated that their combined capital expenditure could increase by around $534 billion between 2025 and 2027, while their annual operating cash flow could rise by approximately $340 billion over the same period.This highlights the financial pressure that could emerge as companies continue expanding their AI infrastructure. Even when AI-related revenue grows, the cost of building and maintaining the infrastructure needed to support these services could consume a significant portion of the cash generated by their businesses.Amazon, Meta are also facing AI spending scrutinyAmazon is among the biggest spenders in the AI infrastructure race. The company said it remains on track to spend around $220 billion on capital expenditure in 2026, with a significant portion directed towards AI infrastructure. CEO Andy Jassy has defended the investment, saying spending on Amazon Web Services is delivering growth.Meta has also faced investor concerns over its AI expenditure. The company recently raised its 2026 capital expenditure outlook to between $135 billion and $145 billion. Its increased spending outlook overshadowed stronger-than-expected revenue growth, highlighting investor concerns about how quickly its AI investments will translate into financial returns.You use AI every day. Now get your AI Quotient. Take the AIQ test.