Greg Ip, WSJ’s Chief Economics Commentator, estimates that even with the recent results from companies that have bolstered their earnings by embracing AI, this new “asset-heavy” business model is draining tech-based and other companies of free cash flow and straining investors.
The AI gold rush has everyone from Microsoft to Meta acting like they’ve inherited a trust fund from a grumpy 19th-century tycoon. 💸 But here’s the twist: they’re splashing cash on servers, GPUs, and power bills like they’re at a tech-themed Burning Man. Greg Ip, WSJ’s resident economics sage, points out that while profits are up, free cash flow—the lifeblood of a company that doesn’t want to live paycheck to paycheck—is vanishing faster than a Bitcoin wallet in a coffee shop.
Free cash flow, that humble metric that tells you if a company can afford to buy pizza for its interns, has been plummeting since 2023 for Alphabet, Amazon, Meta, and Microsoft. 🤷♂️ Meanwhile, their net income? Soaring. But who needs cash when you can just… invest it all in data centers? Or maybe that’s the problem.
These AI pioneers have traded their digital silk for a concrete and copper corset. The new “asset-heavy” model demands warehouses full of hardware and enough electricity to power a small country. It’s like swapping a Netflix subscription for a coal mine. Investors, meanwhile, are left wondering if this is the next dot-com boom or a very expensive art project. 🎨
Ip’s verdict? “Hey, maybe this will work out!”—but with the enthusiasm of someone betting on a raccoon in a poker game. Jason Thomas of Carlyle Group adds:
The variable people miss out on is the time horizon. All this capital spending may prove productive beyond their wildest dreams, but beyond the relevant time horizon for their shareholders.
In other words: “Sure, this might pay off eventually—but by then, we’ll all be using quantum computers and you’ll owe me interest.” The Commerce Department also helpfully notes that half of this year’s 1.2% growth is thanks to companies spending like they’re in a bidding war for the cloud. If they hit pause, the economy might shrug and say, “Okay, but where’s my pizza?” 🍕
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2025-08-04 12:57