US stock market's "Magnificent Seven" face pressure on AI investment returns: four major cloud giants see negative cash flow, Nvidia's growth highly dependent on data center construction.

Beating AI News Flash: After the U.S. midterm elections, market concerns over tighter AI regulation and slower data center construction have intensified, triggering a sharp selloff in U.S. tech stocks. On November 5, the "Magnificent Seven" U.S. tech giants shed approximately $1.04 trillion in market value in a single day, with Nvidia falling 9.26% and losing over $440 billion in market capitalization — a decline 2 to 4 times steeper than that of core customers including Microsoft, Google, and Amazon.

Funding pressure on AI infrastructure investment is mounting. Microsoft, Google, Amazon, and Meta collectively generated operating cash flow in the third quarter that was insufficient to cover capital expenditures, leaving a funding gap of approximately $26.4 billion, compared with a cash flow surplus of about $61.7 billion for the four companies a year earlier. Amazon's free cash flow over the past 12 months swung from a net inflow of $14.8 billion to a net outflow of $42.4 billion, Meta's free cash flow turned negative for the first time in over a decade, and Google's long-term debt rose from approximately $20 billion to $125 billion.

Meanwhile, the U.S. midterm elections may affect the pace of data center construction. On voting day, of 41 local ballot measures involving data centers across 10 U.S. states, 40 leaned toward restricting development, with 27 restrictive or opposition measures passing. Research firm SemiAnalysis estimates that the policy changes will have limited impact on projects already under construction for 2027 but could disrupt computing capacity expansion plans for 2028 and beyond.

The report noted that more than 90% of Nvidia's revenue comes from its data center business, and its growth is highly dependent on continued downstream investment. If data center projects are delayed, cloud giants can postpone capital expenditures, but Nvidia may face delayed delivery of chip orders, making it more sensitive to infrastructure slowdowns.

Nevertheless, AI demand has yet to show a clear peak. Google Cloud's third-quarter operating income reached three times the year-earlier level, AWS operating income rose from $11.4 billion to $17.8 billion, and Microsoft Azure revenue grew 48%. The market's core concern is currently the payback period of massive AI investments, financing costs, and actual computing capacity delivery capability — rather than a simple decline in demand.