The artificial intelligence boom has encountered an unexpected obstacle as power shortages are leaving billions of dollars worth of AI chips unused at data centres. According to Business Insider, these idle chips, known as 'dark GPUs', highlight a growing gap between AI infrastructure investment and power availability. Amazon was buying billions of dollars worth of Nvidia AI systems even as some of its data centres lacked the electricity needed to operate them. Internal company emails reviewed by Business Insider showed that Amazon Web Services expected to receive about $5 billion worth of Nvidia GB300 server racks in August this year, followed by around $3 billion worth every month. Some equipment was being stored in warehouses until the required power infrastructure became available.
The core businesses of America's technology giants are showing signs of slowing growth as companies transition to AI-powered products. According to Business Standard, Alphabet reported that ad sales from search and other channels — a business line that accounts for roughly half of overall revenue — grew at the slowest pace in five quarters. Despite this slowdown, Alphabet maintained a capital spending outlook of as much as $205 billion for this year. Amazon's growth in both its core ecommerce juggernaut and advertising business slowed last quarter, with the company's advertising services unit seeing growth of 11%, the slowest pace since Amazon first broke it out as a separate category in 2022. The online stores business grew by just 2%, a level not seen in more than three years when people resumed pre-pandemic spending habits.
Amazon shares fell as much as 7% in extended trading after the company reported massive cash burn from AI infrastructure spending that overshadowed record cloud growth. According to Reuters, Amazon burned $7.6 billion in cash during the third quarter, a dramatic increase from the $14.8 billion generated in the same quarter last year. The company's capital expenditure of $77.26 billion was $20 billion above estimates, driven by aggressive spending to capture AI demand. Revenue and ad sales missed estimates, with the company forecasting $240-247 billion in fourth-quarter revenue, slightly below analyst estimates of $244.51 billion. CEO Andy Jassy maintained optimism, stating "Our strategy is working and I expect it will for the foreseeable future," while AWS revenue grew 39% to $46 billion, beating estimates of $45.61 billion.
The Federal Reserve kept interest rates unchanged as widely expected, with markets barely reacting to the announcement. According to latest reports, the S&P 500 is still carving out lower highs and lower lows, with the tech-heavy Nasdaq 100 scraping at the top of a range it has held since mid-October. The US dollar weakened after the Fed announcement, with the euro, British pound, Australian dollar, and Canadian dollar all finding their footing. Crude oil went back on the offensive, while gold and silver softened in the immediate aftermath of the Fed decision.
The AI infrastructure spending spree is creating significant financial pressures across major technology companies. According to reports from Business Standard, Amazon forecast holiday-quarter sales below Wall Street expectations, highlighting growing consumer pressure as inflation increases. The company's massive cash burn from surging data-center spending has transformed once debt-light tech giants into major borrowers. Alphabet and Meta both burned cash in the September quarter, while Microsoft joined their borrowing binge with a $25 billion debt sale on Thursday. The AI spending spree is eating into Big Tech's once-enviable cash flows, though these companies maintain deep pockets to sustain their spending.
Recent developments at Amazon suggest the infrastructure challenge is continuing even as technology companies increase their AI investments. On Thursday, Amazon reiterated its plan to spend $220 billion on capital expenditure in 2026, with CEO Andy Jassy saying the company expected to spend even more in 2027. Amazon's third-quarter results showed its free cash flow turned negative, with an outflow of $42.4 billion over the trailing 12 months. The company attributed the decline primarily to higher spending on property and equipment, driven by AI investments. Jassy, however, said Amazon had strong visibility into customer demand for AI computing capacity through 2027, 2028 and 2029.
