Alphabet just stepped up the AI spending race. Why that could be an overhang for the hyperscaler stocks

Alphabet announced an $80 billion equity offering on Monday to fund its artificial intelligence buildout, and Wall Street is nervous that it could start a trend. After swelling over the past few years, analysts expect free cash flows at the hyperscalers to head downwards. As demand for artificial intelligence increases and spending plans keep getting bigger, investors are getting ready for more capital raises and downward pressure on stocks. "We cannot rule out further capital raises from other hyperscalers looking to build out AI infrastructure [and] compute capabilities against what appears to be a backdrop of strong investor demand," Paul Rossington, tech analyst at HSBC, wrote to clients on Tuesday. Alphabet stock was down more than 2% in Tuesday trading. Microsoft was down more than 3%, Amazon was off 1%, and Meta Platforms was up less than 1%. The $80 billion equity offering from Alphabet amounts to a 2% stock dilution, which Wells Fargo analysts described as "very modest." However, it could be enough to make investors redo their return-on-investment calculations – potentially for the sector as a whole. "The event likely compels investors to re-underwrite the capacity ROI thesis at Google and perhaps more broadly across the hyperscalers," Ken Gawrelski at Wells Fargo wrote on Monday. "CapEx expectations [will] likely move higher." Free cash flow in freefall Cash flows for the AI infrastructure builders are down across the board for 2026 – some by a lot. …