AI Spending Boom: Capex to Exceed Cash Flow

Tech investors anticipating a slowdown in AI spending may need to wait until 2028. Recent analyses indicate a substantial rise in hyperscaler capital expenditures. For 2027, these estimates have jumped to over $1 trillion, representing a significant increase of 33% year-over-year, surpassing earlier projections by over $100 billion.

Companies like Meta and Alphabet are at the forefront of this investment wave. Meta has tightened its 2026 capital expenditure range to between $135 billion and $145 billion. Alphabet's full-year guidance was raised to $195 billion to $205 billion, with executives anticipating a significant increase for 2027. However, specific 2027 outlooks remain undisclosed by Meta, citing dynamic infrastructure planning.

This aggressive spending trend suggests that capital expenditure is expected to outpace cash flow from operations for hyperscalers from 2026 through 2028. In the current financial landscape, Microsoft stands out as the only hyperscaler with a positive near-term free cash flow narrative.