The global race to dominate artificial intelligence is accelerating, but Citigroup has warned that not all big technology players are entering this phase from equal financial positions. According to Citigroup analyst Heath Terry, Amazon (AMZN) and Alphabet (GOOGL) are both committing tens of billions of dollars to expand AI-driven cloud infrastructure through Amazon Web Services and Google Cloud, but Citi cautions that the two companies’ ability to fund this expansion internally differs sharply, raising investor focus on free cash flow strength as AI spending accelerates.
However, financial experts say the companies are approaching this AI expansion from very different financial situations. Heath Terry, a senior analyst at Citigroup, has highlighted that while both companies are growing fast in AI, the way they fund their spending is not the same. The discussion is not about which company is growing faster but about which one has stronger internal cash strength.
Massive Spending Push as AI Moves Beyond Testing
Artificial intelligence was once mainly used in small testing programs. Now, businesses across industries are applying AI tools to daily operations. Many companies have moved from using AI for limited teams to rolling it out across entire organizations. When thousands of workers begin using AI tools at the same time, the need for computing power increases rapidly.
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To support this demand, cloud service providers must build more data centers and install additional servers. These centers also require advanced cooling systems and large amounts of electricity to keep operations running smoothly.
Alphabet has announced plans to spend between $175 billion and $185 billion on AI infrastructure and data center growth. Amazon is expected to spend even more, with capital investments potentially reaching $200 billion by 2026. Most of these investments will strengthen cloud services that help companies run AI software efficiently.
Cloud platforms such as Amazon Web Services and Google Cloud are central to this expansion. These services allow businesses to store data, run applications, and develop AI-powered solutions without needing to build their own infrastructure.
Cash Flow Gap Creates Financial Contrast
According to Heath Terry, the major difference between Amazon and Alphabet lies in free cash flow. Free cash flow refers to the money companies have left after covering operating expenses and business maintenance costs. This remaining cash is often used for expansion projects, investments, or debt payments.
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Financial results from 2025 show Alphabet produced about $70 billion in free cash flow. Amazon generated approximately $37 billion during the same period. This large difference is important because both companies are planning extremely expensive AI investments.
Alphabet’s stronger cash position allows it to fund most of its AI and cloud expansion using money generated from its existing business operations. The company earns strong revenue from advertising, search services, and cloud operations, helping support its growing AI infrastructure.
Amazon’s financial structure is broader and includes heavy spending in logistics, warehouse networks, and delivery systems. While Amazon Web Services generates strong profits, the company’s overall spending across multiple business areas can limit available cash. As AI investment grows, this could push Amazon to borrow money in order to continue expanding at its current pace.
Analyst Ratings Show Mixed Investment Expectations
Despite the financial differences, market analysts remain positive about both companies’ long-term strength in the AI sector. Data from TipRanks shows that both Amazon and Alphabet currently hold strong buy ratings among analysts.
However, the expected stock growth potential varies between the two companies. Amazon’s average price targets suggest a possible upside of around 35 percent. Alphabet’s expected upside is estimated at approximately 17 percent based on analyst forecasts.
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These projections show how investors are evaluating each company differently. Some investors focus on Amazon’s rapid growth and dominant cloud service presence. Others highlight Alphabet’s strong financial stability and ability to fund AI expansion without heavily relying on external borrowing.
The growing AI market continues to shape the competition between major cloud providers. As more businesses increase AI adoption, the scale of infrastructure spending and cash management strategies is becoming a major focus for investors and financial experts monitoring the technology industry.
