Big tech approaches ‘red flag’ moment: AI capex is so great hyperscalers could go cash-flow negative, Evercore warns

Big tech companies’ capital expenditure (capex) on AI has become so large that it is at risk of making some companies go cash-flow negative, a “red flag” for stock valuations, according to analysts at Evercore ISI.

Nervousness about the effect of AI on the stock market has led to a high level of volatility in the S&P 500 year-to-date, as investors alternately bid up tech stocks based on positive quarterly earnings reports and then sell them off on speculation about AI’s ability to destroy their underlying businesses.