Chipmakers projected to generate $430 billion in free cash as AI spending drains Big Tech

Bank of America estimates that Nvidia, Micron, Broadcom and Applied Materials will together generate a record $430 billion in free cash flow over the next 12 months, more than three times the amount they produced two years ago, driven by strong demand for artificial-intelligence chips.

In contrast, the combined free cash flow of the leading hyperscalers—Amazon, Alphabet, Meta, Microsoft and Oracle—is projected to turn negative for the first time on record, a sharp decline from the $260 billion peak reported in 2024.

"Chipmakers are becoming cash machines, while AI giants are burning record amounts of capital," said strategists at the Kobeissi Letter.

Wall Street analysts note that capital expenditures on AI by big-tech firms are expected to rise 70 % year over year and exceed $700 billion in 2026, prompting concerns about the sustainability of such spending.

Morgan Stanley reports that the “Magnificent Seven” stocks—Nvidia, Microsoft, Alphabet, Amazon, Meta, Apple and Tesla—are now trading at their lowest valuation premium to the broader S&P 500 in more than a decade, with the price-to-earnings premium falling from above 30 % to around 10 %.

"We are going through another 'gut check' a few weeks ahead for the tech trade as tech investors await a very important 2Q earnings season in July to further validate the AI Revolution buildout," veteran tech strategist Dan Ives wrote.

"In the meantime jitters will continue as worries around the costs of this once-in-a-generation tech buildout hit its next gear of growth," Ives added.

All of the Magnificent Seven stocks have underperformed the S&P 500 in 2026 so far, except Alphabet, which has posted a 14 % year-to-date gain versus the index’s 8.8 % rise.