Dwindling cash and soaring memory costs: Tech's AI buildout has ballooning price tag
Amazon boosted its capital spending forecast for the year on Thursday to $220 billion, the highest among the four hyperscalers. Amazon also reported...
Key points
- Amazon boosted its capital spending forecast for the year on Thursday to $220 billion, the highest among the four hyperscalers.
- Amazon also reported negative free cash flow for the trailing 12 months of $7.6 billion, a day after Meta disclosed a 91% drop in cash generation from a year earlier.
- Tesla CEO Elon Musk described memory pricing as "insane" on the automaker's earnings call last week, and Amazon CEO Andy Jassy said the "inflated price" of memory chips drove his company's capex guidance higher.
- "And we're continuing to evaluate this." For Apple, memory is a revenue problem, as the company prepares for weaker consumer demand due to higher prices.
What happened
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Amazon boosted its capital spending forecast for the year on Thursday to $220 billion, the highest among the four hyperscalers. Amazon also reported negative free cash flow for the trailing 12 months of $7.6 billion, a day after Meta disclosed a 91% drop in cash generation from a year earlier. Tesla CEO Elon Musk described memory pricing as "insane" on the automaker's earnings call last week, and Amazon CEO Andy Jassy said the "inflated price" of memory chips drove his company's capex guidance higher. "And we're continuing to evaluate this." For Apple, memory is a revenue problem, as the company prepares for weaker consumer demand due to higher prices. Tesla and Alphabet both sank last week as they turned cash flow negative and pointed to accelerated spending. Mahaney said the growth rate for Amazon Web Services had been lagging Microsoft Azure and Google's cloud business, and that "this is just the breakout that the stock needed." Wedbush analysts said in a Friday note that Amazon's report was the "cleanest beat" among the hyperscalers it covers, while management offered the clearest explanation of how it will achieve returns on its capex spend.