10/30/2026
As I type this (Friday October 30th 10:56 AM EST), the NASDAQ has traded down sharply for the past two days on the legs of disappointing earnings reports from Google, Intel, and Amazon.
The debate over the viability/sustainability of the AI buildout continues and has been a polarizing theme since summer causing technology stocks to bounce up and down like yo-yos.
To be specific, the major theme is the argument for or against spending on AI that has consumed growing amounts of capital and has caused many hyper scalers such as Google and Amazon to go cash flow negative, let alone many other companies throughout the AI ecosystem, particularly those specializing in cloud such as Oracle and Coreweave.
The $64,000 question many investors have is “when is the payoff”? As the need for investment capital grows, the payoff appears uncertain if not unreachable to the eyes of many.
These are the investors who don’t understand economics. Demand drives everything. AI usage is growing exponentially as measured by tokens consumed, and the corresponding need for infrastructure is insatiable. Annual cloud growth for many companies ranges between 50% - 100%, and many companies within the ecosystem have order backlogs of three years or more.
The biggest limitations appear to be the amount of financing available and the increasing cost of components from the shortage of supply. Meanwhile, companies such as Google and Intel are seeing reductions to their core businesses (search engine advertising and PC chips, respectively) as search engine growth falls commensurate with the adoption of AI and the cost of PC chips reduce demand for consumers – all the more reason why these companies need to further invest with the growth of AI as markets evolve.
The rise of interest rates with Federal Reserve monetary policy and increased debt loads are fairly nominal in the grand scheme of things, but those companies that are not well capitalized face the highest risk of operational compromise or failure if demand suddenly changes and their debt load becomes unsustainable.
As time should prove, there will be winners and losers within the industry, but those companies with the strongest revenues and balance sheets should overcome these obstacles quite easily and continue to see exponential growth for the foreseeable future. That’s the payoff, but it doesn’t happen overnight. To judge any of these companies based on a quarterly report that momentarily disappoints is a short-sighted view in my opinion. That’s also the difference between investing and speculation. Amazon had many years of huge revenue growth but negative cash flow while investing in its on-line supermarket and delivery ecosystem, and yet many people regret not having been invested during those formative but promising days before it became the juggernaut that it is now.
The same dynamics apply to the AI buildout at large. This article should not be construed as specific investment advice. Consult with a credentialed financial professional familiar with your situation before making investment decisions.
Neil H. Gendreau CFP, ChFC
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Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Neil H. Gendreau, CFP, ChFC is not affiliated with Kestra IS or Kestra AS.
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