They’ve invested huge amounts in AI infrastructure, but they’ve raised cash even faster.

By Wolf Richter for WOLF STREET.

For the economy, the question is this: When will the tsunami of AI spending fizzle? Follow the spending. So if markets get rough, and yields spike, and stocks tank, and raising massive amounts of cash by issuing bonds, loans, or shares becomes difficult or impossible, then how long can the spending continue? That depends on how much cash the companies will still have on hand. And it’s a lot, and it has been growing as they’ve been raising funds faster than they’ve been investing them.

The 13 largest AI-related giants are sitting on $1.13 trillion in cash, cash equivalent, and marketable securities, as per their latest quarterly filings with the SEC. This is an astounding amount of cash. The top three – Alphabet, Anthropic, and Amazon – hold over half of that ($511 billion).

This table shows their prodigious cash, cash equivalent, and marketable securities on their balance sheets as per their latest quarterly filings (10-Qs except S-1 for Anthropic, 8-K for Micron), and the ending date of their most recent quarter that they reported.

If and when markets get messy and ugly enough that raising prodigious amounts of cash through debt or equity sales is no longer easy, these companies will still sit on so much cash that they can keep spending for a while longer, until perhaps markets calm down.

These companies have been raising, and continue to raise, gigantic amounts of cash via debt and equity issuance, and/or they’ve been generating massive cash from their operations, such as Nvidia, and they’ve been doing so even faster than they’ve been investing their cash in the AI infrastructure buildout – circular financing and all.

Several of the giants are now booking negative free cash flows, including Alphabet with a negative free cash flow of $9.1 billion in Q3, meaning that its capital expenditures (mainly the investments in AI infrastructure) exceeded its operating income by $9.1 billion. Anthropic is burning cash hand-over-fist.

But they’ve been burning cash less fast than they’ve been raising cash through debt issuance and equity issuance, and their cash balances have ballooned despite the massive spending.

The storm surge of corporate and investor money into AI infrastructure creates revenues and jobs at companies that are equipping and building the AI infrastructure, and at companies that catch the secondary and tertiary effects. And it ripples out from there.

Pushing this corporate and investor money into the economy has been a potent stimulus that then circulates throughout the economy.

We’ve seen the numbers on Thursday: a GDP measure for the private US economy that excludes government spending, imports and exports – “Real Final Sales to Private Domestic Purchasers” – soared by 4.9% in Q3 annualized, adjusted for inflation, the fastest growth rate since the reopening of the economy in 2021, and the second consecutive quarter, powered by a spiking investments in equipment, intellectual property, and nonresidential structures, and also by robust consumers.

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