Apollo's Sløk: The market faces big risks if hyperscalers' AI profits get delayed

Apollo's Sløk: The market faces big risks if hyperscalers' AI profits get delayed Jake Conley · Breaking Business News Reporter Thu, July 9, 2026 at 6:17 PM GMT+2 3 min read APO GOOGL AMZN MSFT META Wall Street expects hyperscaler companies' free cash flow to boom, starting in 2028. If that boom doesn't materialize, the consequences could be severe, warned Apollo Global Management chief economist Torsten Sløk. (Disclosure: Yahoo is a portfolio company of funds managed by affiliates of Apollo Global Management.

) As hyperscalers have poured money into artificial intelligence, free cash flow at the traditionally cash-heavy Big Tech leaders has plummeted. That trend has pushed the "Magnificent Seven" companies to pivot toward debt issuance to fund hundreds of billions of dollars in spending. Spending in 2026 by Amazon ( AMZN ), Meta ( META ), Google ( GOOG , GOOGL ), and Microsoft ( MSFT ) is now expected to cross $700 billion as those companies have gone from being the "source of cash" to the "user of cash," Bank of America's Savita Subramanian and Vivek Arya noted.

The industry is counting on that trend of declining free cash flows to turn around as the AI business case, in theory, starts generating serious cash for companies that have thrown money at the burgeoning technology. Apollo's Sløk is looking for three potential risks if that doesn't happen. Wall Street is looking for free cash flow to make a strong recovery in 2028 and beyond.

The market could face a cascade of risks if those projections don't pan out, Apollo Global Management's Torsten Sløk wrote. · Apollo Global Management The first risk is if earnings results disappoint. Should the projected surge of free cash flow be delayed "while committed capex and heavy depreciation hit on schedule," it could squeeze margins, Sløk wrote.

Without money coming in the door, the argument goes, massive capital expenditure commitments could become increasingly hard to fund. To be fair, the hyperscalers are in healthier financial positions than the 1990s tech leaders that blew up in the market collapse through 2000 and 2001, Bank of America recently noted to clients. But today's Big Tech leaders, BofA analysts said, are now "at least as capital-intensive as oil companies," which traditionally rank among the most capital-intensive businesses in the market.

Furthermore, the decoupling of hyperscalers' earnings-per-share growth from free cash flow could mark a potential deterioration in earnings quality, per BofA. Dive deeper into Big Tech's AI spending plans: Big Tech is about to spend trillions to dominate the AI era Tech giants are not going to slash their AI spending: Analyst Alphabet's $80 billion stock sale shows how expensive AI is getting That trend gets at Sløk's next risk to watch. Lesser-than-expected earnings from Big Tech could trigger a Magnificent Seven sell-off that takes the rest of the market — the "S&P 493" — with it, according to Sløk.

Those seven Big Tech stocks "now account for so much of the indices, the pain can't stay contained, it spreads to chips, power, data centers and the S&P 500 as a whole," Sløk wrote. And if internal cash is unable to keep pace with spending, pushing hyperscalers further into the debt market, their stocks could invite rating downgrades if profits fall behind schedule. Story Continues That's all bad for the US economy, Sløk argued.

"With so much riding on so few names, a slower payoff wouldn't just be a sector problem, it would risk tipping the economy into recession and the S&P 500 into a correction," Sløk wrote. Jake Conley is a breaking news reporter covering US equities for Yahoo Finance. Follow him on X at @byjakeconley or email him at jake.

conley@yahooinc. com .