The artificial intelligence (AI) boom, which has prompted most of the big tech companies to enter the industry, presents hidden risks for the U.S. economy. In a recent article, The Wall Street Journal’s Chief Economics Commentator Greg Ip suggests that, despite the level of growth that tech behemoths like Microsoft and Meta are experiencing, there is a key element being ignored: free cash flow.

Free cash flow is one of the indicators used to assess a business’s ability to generate money, defined as cash flow from operations minus capital expenditures. This metric has been declining since 2023 for Alphabet, Amazon, Meta, and Microsoft, even as net income has grown during the same period.

The fact is that these new AI-focused companies have pivoted to an “asset-heavy” business model, which requires large investments in infrastructure, energy, and computing equipment to sustain growth. This shift is draining their treasuries, forcing them to invest more of their revenue in these areas, whereas they previously relied on their intellectual properties and digital platforms to generate income.

Ip notes that, while big tech investors expect this “asset-heavy” business model to be as profitable as their previous model, there is no evidence backing up this claim.

Jason Thomas, head of research at Carlyle Group, stated:

The variable people miss out on is the time horizon. All this capital spending may prove productive beyond their wildest dreams, but beyond the relevant time horizon for their shareholders.

Companies stopping investments in these new technologies could affect the U.S. economy, given that the Commerce Department estimates that over half of the 1.2% growth rate registered this year was propped up by information processing expenses.

Read more: AI Stocks Expected to Drive Future Growth Amidst Mixed Earnings Season

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