AI's bottomless pit problem: Investors are scrutinizing costs

AI's bottomless pit problem: Investors are scrutinizing costs Nathan Bomey Wed, August 5, 2026 at 11:57 PM GMT+2 2 min read SPCX SPGI AMD Illustration: Aïda Amer/Axios. Stock: Getty Images Investors are scrutinizing the AI trade amid concerns that companies may be throwing money into a bottomless pit. Why it matters: Not all AI spending is created equal.

Investors are drawing a harder line on companies that fail to show how today's AI investments will translate into profits. "It's all about capex and free cash flow — and investors are not rewarding negative free cash flow," Melissa Otto, head of S&P Global's Visible Alpha Research, tells Axios in an email. The big picture: The markets have punished several AI titans over AI capital expenditure concerns in recent days.

SpaceX plunged to new lows Wednesday, even after the company topped revenue expectations in Tuesday's earnings report, as investors fretted over its massive capex plans. AMD shares slumped Wednesday despite a 50% jump in revenue as investors look for evidence that its customers' AI infrastructure investments will continue translating into accelerating returns, Emarketer analyst Jacob Bourne tells Reuters. Meta shares are down nearly $200 per share from their peak as the company continues to invest heavily in capex, having reported a 55% increase in expenses in its most recent quarter.

Zoom in: SpaceX CEO Elon Musk told investors on an earnings call Tuesday that the company now expects to reach $1 trillion in revenue by 2030, if not 2029, up from a previously projected 2031. But his extensive commentary about the investments necessary to get there unnerved investors. That includes rocket development, AI data centers, power deals — with compute capacity alone expected to hit 5 gigawatts to 10 gigawatts by the end of 2027, Musk said.

Yes, but: A strong cloud businesses could make a difference, the Wall Street Journal recently noted. Amazon, Microsoft and Google have all rattled investors with eye-popping AI spending, but strong cloud results and massive backlogs of contracted demand have given their shares a recent boost. The bottom line: "Investors have become increasingly discerning," according to Ed Yardeni, president and chief investment strategist of Yardeni Research.

"Instead of investing on faith, they've been assessing company by company whether future demand might be huge enough to justify the massive capex devoted to data center buildouts. " AI is moving fast. Axios AI+ keeps you ahead.

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