The high-tech market is showing an unprecedented contrast. Leading semiconductor manufacturers are reaching record levels of free cash flow, while the largest companies in the artificial intelligence sector are facing negative values of this key financial metric for the first time in their history.
Cash Flow: Chipmakers vs. AI Giants
According to my analysis, based on the latest data, four leading chipmakers — Nvidia (NVDA), Micron (MU), Broadcom (AVGO), and Applied Materials (AMAT) — will collectively generate a record $430 billion in free cash flow over the next 12 months. This figure is more than triple the results from just two years ago.
At the same time, for five tech giants actively investing in AI — Amazon (AMZN), Alphabet (GOOGL), Meta, Microsoft (MSFT), and Oracle (ORCL) — the combined free cash flow will turn negative for the first time. This is a sharp reversal: as recently as 2024, at their peak, these companies reported a combined figure exceeding $260 billion.
Reason for Colossal Investments
The key driver of this imbalance is the explosive growth in capital expenditures on AI. By my estimates, the combined spending of the five mentioned AI giants on artificial intelligence development will reach $1.8 trillion in 2026 and 2027. This means chipmakers are turning into veritable "cash machines," while their main clients are burning record amounts of capital in an attempt to maintain leadership in the AI arms race.
Question of Cycle Sustainability
This market configuration raises serious questions. Economist Remy Bourgeau rightly points out that sooner or later, the AI giants will have to start making money again, and the flow of capital to chipmakers cannot be infinite. What will happen to chip manufacturers when their main customers begin to cut investments?
Separately, the Chinese factor is worth noting. Chinese giants, in essence, continue to follow a logic favorable to the U.S. administration: they sell their models worldwide for a fraction of American prices, while simultaneously purchasing Chinese chips. According to Bourgeau, this is precisely the essence of the current investment cycle.
My expert conclusion: We are witnessing a classic infrastructure investment bubble. Chipmakers are currently at their peak, but their well-being directly depends on the ability of AI giants to monetize their colossal investments. As soon as the market realizes that the returns from AI do not justify the costs, the correction will be harsh and will affect the entire chain — from data centers to semiconductor manufacturers.