AI Big Tech Loses $2.7 Trillion in Market Cap in June Alone... "Can It Absorb Massive Investment?"

[Financial News]  

The market capitalization of AI big tech companies, including the M7, Broadcom Inc., and Oracle Corporation, is estimated to have fallen by $2.7 trillion, or about 4,169 trillion won, in June.
The decline reflects growing investor concern over whether these companies can sustain massive AI investments.
Yahoo Finance reported on the 24th, local time, that the market jitters that were initially centered on the M7 earlier this month have now spread to Broadcom Inc. and Oracle Corporation, both key players in AI infrastructure.
NVIDIA and Broadcom, which are riding the AI hardware boom, as well as Alphabet Inc., Microsoft (MS), Amazon.com, Inc., Meta Platforms, and Oracle Corporation, which are driving the surge in AI spending, are all struggling.
Apple and Tesla are not major players in the AI theme, but investors still view them as AI-related stocks.
Their huge AI investments are adding to market anxiety.
Charlie McElligott, a cross-asset strategist at Nomura, described hyperscalers as the "funding source short position" behind the infrastructure trade in AI bottlenecks, including memory, GPUs and CPUs, optics, networks, servers, and power. In other words, hyperscale cloud companies that provide services through massive data centers have acted as the cash engine lifting the shares of AI-critical component makers and infrastructure firms, such as semiconductor and power grid companies.
If that funding source weakens, it would mean that earnings for related stocks will deteriorate and their share prices will fall together.
Signs of that are already appearing.
Free cash flow, or FCF, at hyperscalers is expected to shrink sharply as AI buildouts become increasingly expensive.
That money plays a crucial role. It is used for share buybacks, acquisitions, dividends, and future investment, and it also serves as a buffer against shocks.
But that cushion is getting smaller.
Data centers, chips, power, networking equipment, and cloud infrastructure are no longer differentiators that determine AI competitive advantage. They have become the price of admission that companies must pay simply to avoid being left behind in the market.
Questions are growing over whether these big tech companies can keep spending heavily on AI without damaging the strong cash flow that has underpinned their soaring share prices.
Investors are waking up from the spell of AI's promised bright future and asking big tech whether it can afford the cost of making that future real.
Ultimately, in next month's second-quarter earnings season, big tech companies are expected to prove that they can generate real profitability to offset the enormous infrastructure costs.

dympna@fnnews.com Song Kyung-jae Reporter