An unprecedented contrast is forming in the high-tech market. While semiconductor manufacturers are preparing for a record influx of free cash flow, the largest players in the artificial intelligence sector are, for the first time in their history, showing negative free cash flow. This is not just statistics, but a tectonic shift in the balance of power in the tech industry.
According to my data analysis, four leading chipmakers — Nvidia (NVDA), Micron (MU), Broadcom (AVGO), and Applied Materials (AMAT) — will generate a combined free cash flow of $430 billion over the next 12 months. This figure is more than three times the level of two years ago. Essentially, these companies are turning into real "cash machines," capitalizing on the global frenzy around AI infrastructure.
At the same time, the picture for AI giants is diametrically opposite. The combined free cash flow of Amazon (AMZN), Alphabet (GOOGL), Meta (META), Microsoft (MSFT), and Oracle (ORCL) will turn negative for the first time in history. For comparison, at their peak in 2024, these companies reported a combined figure of over $260 billion.
Why are AI giants going into the red?
The reason is the explosive growth in capital expenditures on AI. My calculations show that the combined spending of these five companies on artificial intelligence will rise to $1.8 trillion in 2026 and 2027. They are literally burning capital, financing the construction of data centers, purchasing accelerators, and developing new models. Chipmakers, in turn, are the main beneficiaries of this cycle.
However, a key question arises: how sustainable is this configuration? Economist and analyst Remy Bourgeau rightly notes that sooner or later, AI giants will have to start making money again. When the flow of capital from them to chipmakers dries up, semiconductor manufacturers could face a serious shock. Bourgeau also points to the China factor: Chinese giants are selling their models worldwide for a fraction of US prices and purchasing Chinese chips — this is a direct challenge to the current investment cycle.
My expert opinion: The current imbalance cannot last forever. The market is overestimating the sustainability of chip demand, not accounting for the fact that it is artificially fueled by the loss-making investments of the AI companies themselves. As soon as the capital expenditure cycle begins to slow down, chipmakers risk facing a sharp correction. Investors should prepare for volatility, not linear growth.