The latest financial disclosures by four of the biggest hyperscalers, Amazon, Alphabet, Microsoft, and Meta, as well as Elon Musk’s up-and-coming AI player, SpaceX, which includes xAI, revealed that the small group of tech heavyweights is set to invest as much as $828 billion on capital expenditures this year. That spending includes data centers, high-powered chips, and other infrastructure that fuels AI.

Making up the $828 billion in capex spending is an expected spend for 2026 of $220 billion from Amazon, up to $205 billion from Alphabet, approximately $170 billion from Microsoft, up to $145 billion from Meta, and up to $88 billion from SpaceX, according to company earnings releases and calls.

At this point, the massive AI infrastructure bill has surpassed the market value of well-known businesses like energy giant ExxonMobil or payments company Mastercard and is even approaching the roughly $1 trillion America is spending on defense this fiscal year, itself the largest in the world. Several banks, including Evercore and Bank of America, see capital expenditure related to AI hitting $1 trillion in 2027.

Partly in response to this massive spending, stocks tumbled on Friday, leading both the Nasdaq and the S&P 500 to their worst one-day performances since June. The tech-heavy Nasdaq closed down 2.9%, while the S&P 500 fell 1.8%. Nasdaq 100 companies lost more than $1 trillion in market value. Sour guidance for the last three months of the year from U.S. chipmaker Intel also played a role.

Some of the market’s jitters can be drawn to concerns over free cash flow, which has long been a source of strength for Silicon Valley companies but has recently taken a turn. Four of the five tech giants spending hundreds of billions cumulatively on capex had negative free cash flow in the third quarter (Microsoft was the exception), meaning they spent more on buildings, equipment, and other capital investments than they generated in cash from their operations.

As companies that built their fortunes selling software and services increasingly pour money into physical infrastructure they are looking to borrow or raise more in some cases to pay for it. With a handful of technology stocks accounting for an outsized share of the S&P 500, the success or failure of these companies’ investments could have enormous implications for the market and the millions of Americans invested in it.

Aleksandar Tomic, an economist and the associate dean at Boston College, warned that these infrastructure investments could lead to consequences far beyond Silicon Valley if they don’t pan out, especially as companies increasingly rely on debt to finance their expansion. This increased borrowing could raise the cost of capital for other businesses, while a downturn among the tech giants could ripple throughout the broader economy.

“If these tech companies sneeze, the rest of the market would catch pneumonia,” Tomic told Fortune.

A costly bet

Microsoft’s recent financials show how keeping up in the AI race is affecting tech companies’ decisions overall.

For decades, the software giant has been one of the world’s biggest cash-generating businesses. It earned nearly $134 billion in profit during its latest fiscal year and generated almost $183 billion in cash from operations. Still, during the same period, its cash spending on property and equipment rose about 80%.

Microsoft announced a $25 billion bond offering Thursday, its first bond sale in more than nine years. The company said it would use the money for general corporate purposes, which it said could include capital expenditures.

Microsoft remained free cash flow positive last quarter unlike competitors, Amazon, Alphabet, Meta, and SpaceX, but as the costs of infrastructure increase, the company is looking to raise funds.

Meta reported negative free cash flow of $2.1 billion last quarter, compared with positive $10.6 billion during the same period a year earlier. On Monday, it announced it would issue new shares in a plan to raise up to $95 billion that will give it more funds it could put toward AI infrastructure.

Oracle, another major player in the AI infrastructure race, is also relying on borrowing and other avenues to support its expansion. The company told investors this week that it doesn’t expect to return to positive free cash flow until the second half of its next fiscal year, which would run from the six months prior to May 2028. After that, the company said, it predicts free cash flow shooting up to at least $30 billion for the fiscal year ending in May 2029.

The AI payoff

For now, some big tech companies can point to the encouraging sign that customers are paying more than ever for computing power. Google’s cloud revenue more than doubled last quarter, while Microsoft’s Azure business grew 48% and Amazon Web Services expanded by about 39%.

Cloud providers make money partly by renting compute to AI providers. As AI demand is also projected to grow in the coming years, these operations could be a welcome source of revenue for hyperscalers. Still, not all cloud revenue comes from AI, and rising sales don’t necessarily validate the giant investments of today. 

In other positive news for the AI sector, Claude maker Anthropic filed paperwork for an initial public offering this week, helping to boost the Nasdaq 0.8% on Monday. The filing also drew attention to more than $265 billion in future minimum purchase commitments, mostly for cloud computing and other infrastructure services, which could be a boon for hyperscalers.

Still, overall, companies are betting huge sums of money today to build out the  computing capacity they expect to need years from now, a move that could be prescient but also comes with big risks in the short term.

For investors, the question is increasingly whether AI will become profitable enough to justify the enormous bill. If expensive data centers and chips don’t generate the profits that companies are expecting, the fallout could have consequences that extend well beyond Silicon Valley to the U.S. economy and beyond, said Tomic.

“We do need infrastructure, we do need this capital, but, can they sustain it? I think that’s the big big question,” he said.

Amazon CEO Andy Jassy, whose company on Thursday reported negative free cash flow of more than $42 billion over the past year, made it clear on the company’s third quarter earnings call he sees little choice but to keep spending.

“Would it be more convenient if this type of acceleration and opportunity happened over 25 years and you could spread the CapEx over 25 years,” Jassy asked an analyst during the call. “Yeah, it might be more convenient, but that’s not the world that we live in, and that’s not the opportunity.”