Alphabet and Amazon collectively told investors they plan to spend somewhere north of $375 billion on capital expenditures in 2026. The market’s response was about as warm as you’d expect: Alphabet shares dropped 6% and Amazon fell 4% on June 22.

The selloff isn’t an isolated tantrum. It’s the second major wave of capex-related punishment Big Tech has absorbed this year, following a February rout that erased over $1 trillion in combined market value across the sector.

The numbers behind the nervousness

Alphabet guided its 2026 capex at $175 to $185 billion. Amazon flagged approximately $200 billion. Nearly 80% of Amazon’s total outlay is estimated to be AI-related, according to Deepwater Asset Management’s Gene Munster.

The four major hyperscalers, Amazon, Alphabet, Microsoft, and Meta, are collectively on track for $600 to $725 billion in combined 2026 capital expenditures, a sharp increase year-over-year.

The February earnings cycle offered a preview of this exact anxiety. When the hyperscalers revealed their spending strategies during Q4 2025 results around February 5 and 6, the market reaction was swift and brutal. More than $1 trillion in Big Tech market value vanished in the aftermath.

The ROI question nobody can answer yet

Cloud revenue and AI tool monetization are growing, but not at the velocity required to justify hundreds of billions in annual infrastructure buildout. Amazon Web Services, Google Cloud, and their competitors are all posting meaningful revenue gains from enterprise AI adoption.

When capex is accelerating faster than the topline, free cash flow gets squeezed. Free cash flow is increasingly being consumed by these investments, leaving less room for buybacks, dividends, or the kind of financial flexibility that typically supports stock prices.

Capacity constraints add another wrinkle. Even as companies pour money into expansion, supply chain bottlenecks for advanced chips, power infrastructure, and cooling systems create delays that push return timelines further into the future.

What this means for investors

Investors should watch for revenue per AI workload figures, cloud segment margins, and any disclosure around return on invested capital for AI-specific infrastructure.

With four companies all racing to build effectively the same type of infrastructure, there’s a real overcapacity risk if AI demand growth plateaus or takes longer to materialize than projected.

Free cash flow trends are the canary in the coal mine. If these companies can maintain healthy free cash flow despite elevated capex, the market will eventually reward the long-term positioning. If free cash flow continues to deteriorate quarter over quarter, the selloff pressure will intensify, potentially dragging down the broader Nasdaq along with it.