U.S. Big Tech companies reported a combined cash flow deficit of $26 billion in the third quarter, indicating a growing reliance on debt for investments in artificial intelligence (AI) infrastructure. Nearly half of their capital expenditures were allocated to memory semiconductor purchases, suggesting that the performance of Samsung Electronics and SK Hynix will increasingly be tied to the borrowing capacity of these tech giants.
According to the IT industry on November 2, Alphabet, Meta, Microsoft, and Amazon generated $175.5 billion in operating cash flow while needing to source 12.9% of their capital expenditures, totaling $201.5 billion, from outside operations. Alphabet reported a $9.1 billion loss, Meta a $2.1 billion loss, and Amazon faced a $42.3 billion loss over the past 12 months, a stark contrast to its $14.8 billion profit a year earlier. Only Microsoft posted a profit of $18.6 billion.
With investments exceeding earnings, debt levels have risen. Alphabet's long-term debt surged from $46.5 billion at the end of last year to $125.1 billion, a 2.7-fold increase, while Meta did not engage in stock buybacks in the third quarter. The four Big Tech companies have set a capital expenditure guidance of around $730 billion for this year, with Alphabet and Amazon indicating plans to increase investments next year.
Market research firm TrendForce estimates that major Big Tech companies' capital expenditures will rise by 98% this year and by 50% next year. The share of DRAM and NAND memory is expected to grow from 47% this year to 68% next year. As memory prices increase, Big Tech's capital expenditures are expected to rise, further exacerbating cash flow deficits.
SK Hynix reported an operating profit of 83.33 trillion won (80% operating margin) in the third quarter, with DRAM and HBM (high-bandwidth memory for AI) essentially sold out until 2029. The contract prices for DRAM in the fourth quarter are projected to rise by 15% to 20%, including HBM. However, as revenue sources shift from cash to debt among Big Tech, U.S. corporate bond rates and credit conditions have emerged as new variables affecting domestic semiconductor performance.
This trend has led to a noticeable correlation in the stock movements of Samsung Electronics and SK Hynix, which have both dropped sharply whenever U.S. Big Tech stocks have fallen.
This month, NVIDIA and AMD will report their third-quarter results. Their guidance for the fourth quarter will serve as a critical test to determine whether the debt-fueled investments by Big Tech translate into actual semiconductor orders, significantly impacting the direction of domestic semiconductor stocks.
* This article has been translated by AI.
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