Nasdaq faces $2 trillion wipeout: How AI spending is eating into Big Tech investor returns

This was down from 27.4% in the same period last year. Their combined operating cash flow rose 29% year-on-year to a record $542.9 billion. However, capital spending, largely driven by the AI boom, doubled to $556.9 billion. For the first time since 2011, their spending exceeded the cash generated by their businesses. 5 billion a year earlier. Nasdaq faces more than $2 trillion in potential market value loss According to Reuters, more than $2 trillion in market value is set to be wiped off the tech-heavy Nasdaq 100 this month as investors question whether the billions being invested in artificial intelligence will generate returns quickly enough.

The potential loss is slightly higher than SpaceX's entire market value. The Nasdaq 100 has fallen more than 5.8% so far in October, as concerns over the AI trade have increased. Meta, Alphabet and Amazon have all raised their spending forecasts as they compete to expand their AI infrastructure. The prospect of even higher investments has worried investors, particularly as rising borrowing costs could make debt-funded expansion more expensive.

AI spending cuts share buybacks Share buybacks have taken the biggest hit as technology companies direct more money towards AI infrastructure. The five companies reduced their share repurchases by 83% to $13.6 billion in the first nine months of 2026, from $81.8 billion a year earlier, Reuters reported. Dividends, which investors generally see as a more regular commitment by companies, increased to $37 billion from $33.9 billion during the same period.

Alphabet and Meta have not bought back any shares in 2026, after spending a combined $66.5 billion on buybacks in the first nine months of 2025. Amazon does not pay a dividend and has not repurchased its shares since 2022. Microsoft accounted for almost all the remaining buybacks among the five companies. However, it also reduced its share repurchases to $4.4 billion in the September quarter from $5.7 billion a year earlier.

The pressure on cash flows has also meant that some companies are no longer able to cover their shareholder payouts using the money left after capital spending. With their combined free cash flow in the negative, the $50.6 billion paid to shareholders was effectively funded through cash reserves, borrowing or share sales. Why fewer buybacks could hurt investors The fall in share buybacks could have a bigger impact on investors than the numbers suggest.

For years, buybacks have helped technology companies increase their earnings per share (EPS), even when their overall profits did not grow at the same pace. When a company buys back its own shares and removes them from the market, its profits are divided among fewer shares. This increases earnings per share without necessarily requiring the company to make more money. Alphabet reduced its total number of shares by 9.5% between the end of 2020 and 2025 through buybacks, according to ING.

This alone added around 2% a year to its earnings per share, even without any increase in profits. With buybacks slowing, companies will now have to depend more on actual profit growth to improve their earnings per share. This comes at a time when depreciation costs on newly built data centres are also expected to rise. Alphabet and Meta losses add to investor concerns Alphabet recorded its biggest-ever one-day percentage fall after disappointing results and a sharp rise in cash spending.

Meta's plan to raise $97.5 billion through a stock offering has also worried investors over possible shareholder dilution and rising AI costs. Microsoft and SpaceX, however, showed signs that their AI investments are starting to pay off. Amazon has said it expects capital expenditure to reach around $220 billion this year. Other major technology companies have also indicated that their spending will increase further.

This means investors are getting less money back from Big Tech companies today and are instead betting that their massive AI investments will eventually generate enough profits to justify the spending. Meanwhile, Big Tech's growing dependence on debt is adding to investor concerns. Microsoft is reportedly planning to raise $25 billion through a US bond sale, while Meta, Amazon and Alphabet have issued hundreds of billions of dollars in bonds over the past four years.

Despite concerns over rising costs, revenue across the Magnificent Seven has remained strong since ChatGPT's launch in 2022. Amazon's cloud business continued to grow, while Meta reported better-than-expected revenue and Microsoft forecast strong cloud growth. However, it remains unclear how quickly these companies will recover their AI investments. JPMorgan expects global AI infrastructure spending to reach $900 billion in 2026 and $5.5 trillion by 2030. Spending by Amazon, Alphabet, Meta, Oracle and Microsoft this year could match their combined investment since ChatGPT's launch in November 2022.