BofA says Google, Microsoft, Amazon and Meta are sharply increasing AI capital
spending: combined capex is forecast to exceed $860bn in 2026 (roughly +80% YoY)
and reach about $1.2tn in 2027 (+~38% YoY). The expansion is backed by more than
$2.3tn of customer long-term contracts and order backlog (up ~16% q/q), boosting
demand visibility. AI and cloud sales are still growing near 80–100%+ with
improving margins, but higher capex will squeeze free cash flow: capex is
projected at roughly 100–115% of operating cash flow, pushing industry FCF
margin to about -1% in 2026 and -5% to -6% in 2027–28 before recovery as AI
returns materialize. The five hyperscalers have raised about $270bn
year-to-date, mainly long-term debt and equity to bolster liquidity and optimize
balance sheets, not indicative of acute funding stress. Primary supply-chain
beneficiaries listed are compute chips, storage, semiconductor equipment, power
semiconductors and optical communications.
