The largest U.S. tech companies remain profitable, but their aggressive push into artificial intelligence is beginning to weaken traditional financial strengths, according to The Wall Street Journal’s Heard on the Street column. Microsoft (MSFT), Alphabet (GOOG) (GOOGL) and Amazon (AMZN) have collectively poured more than $600 billion into AI-related infrastructure since 2023, and that outlay is starting to reshape their balance sheets.
These companies entered the AI boom with minimal debt and hefty cash reserves, supported by strong earnings unrelated to AI. Their combined net income for 2023–25 is expected to exceed $750 billion, which has helped them justify the spending surge.
Still, rising investment is diluting liquidity: Microsoft’s (MSFT) cash and short-term investments now make up about 16% of total assets, down sharply from roughly 43% in 2020, while Alphabet (GOOG) (GOOGL) and Amazon (AMZN) have seen similar declines as assets balloon with new data center construction and hardware purchases.
Free cash flow is also under pressure. Alphabet and Amazon are on track to generate less than they did last year, and Microsoft’s figure would be lower if long-term data center leases were counted as capital spending. Forecasts show the three companies together could spend $1 trillion on AI infrastructure from 2023 through next year.
Other tech giants are also taking on debt to keep pace. Meta (META) recently doubled its borrowings through a $30 billion bond sale, and Oracle (ORCL) raised $18 billion after striking a massive cloud deal with OpenAI.
Heard on the Street on Sunday argued that these shifts (shrinking cash cushions, heavier capital needs and rising leverage) are pushing Big Tech toward a more capital-intensive business model. Instead of being viewed primarily as high-margin software or cloud platforms, investors may need to evaluate them more like hardware-driven industries where success hinges on large, long-term investment bets.
Analysts expect new yardsticks to gain prominence, such as AI customer adoption, contract backlogs and the monetization of generative AI services. Recent market reactions signal that investors are already showing less tolerance for companies whose AI spending has yet to translate into meaningful profits: Amazon’s (AMZN) shares fell about 5% last week, and Alphabet (GOOG) (GOOGL) slipped roughly 2.5%.
The column notes that escalating investment also heightens the risk of missteps, whether through overbuilding AI capacity or backing technologies that fail to gain traction. Even prioritizing how AI resources are allocated has become a strategic challenge. Microsoft’s (MSFT) chief financial officer, for example, told analysts the company is diverting more AI computing power to its software division, leaving less available for Azure.
As Heard on the Street concludes, Big Tech’s AI ambitions promise long-term returns but introduce new uncertainties. With investment cycles stretching over years and the threat of underutilized infrastructure looming, the sector’s transformation is only beginning.