Record-breaking gap: chipmakers will receive $430 billion in free cash flow, while AI giants turn negative for the first time
The semiconductor and artificial intelligence market is experiencing a historic turning point. According to my data, based on analytics from leading financial services, the four largest 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 is more than three times the figure from just two years ago.
At the same time, the picture for the largest AI companies has turned out to be the exact 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. At their peak in 2024, these companies reported a combined figure of over $260 billion. Now, the forecast points to a deep deficit.
The reason is an explosive surge in capital expenditures on AI
Artificial intelligence-related spending by these five tech giants will total $1.8 trillion in 2026 and 2027. This is precisely what creates a unique contrast: chipmakers are turning into "cash machines," while AI giants are burning record amounts of capital. This statistic, in my view, is a shocking indicator of the current state of the market.
The question of cycle sustainability
This data raises a fundamental question about the future of the investment cycle itself. Analysts and economists are already asking: what will happen to chip manufacturers when AI giants stop pouring all this cash flow into them? Sooner or later, the tech giants will have to start making money again, rather than just spending it on infrastructure.
Separately, the China factor is worth noting. Chinese giants continue to sell their models worldwide at a fraction of American prices and purchase Chinese chips. In my opinion, this is precisely the essence of the current investment cycle: the current influx of capital from AI giants to chipmakers cannot be considered infinite.
My expert opinion: The market is entering a correction phase, where investors must be extremely cautious. For now, chipmakers look like beneficiaries of the boom, but as soon as the capital expenditures of AI giants begin to pay off or, conversely, lead to disappointment, we will see a sharp redistribution of capital. The current imbalance is not a new normal, but a temporary anomaly that will inevitably be corrected.