AI Is Eating Big Tech’s Free Cash Flow: Why Microsoft and Oracle Face Different Risks

The article argues that AI infrastructure spending is starting to pressure free cash flow at major cloud providers, making them look more utility-like. Microsoft and Oracle are both investing heavily, but their risks differ. Microsoft’s recent results showed strong operating cash flow and improving free cash flow, suggesting it can fund AI buildout, though investors still need proof that Azure and Copilot will generate attractive returns before hardware ages. Oracle faces a tougher near-term funding gap: capex exceeded operating cash flow, pushing free cash flow deeply negative, even as cloud revenue and backlog surged. Oracle plans to raise additional capital through debt and equity to keep building capacity. The piece is broadly constructive on AI demand but warns that rising capex could create valuation and balance-sheet risks, especially for companies unable to convert spending into durable returns quickly.