AI Investment Reduces Cash for Big Tech, Increases Cash for Semiconductor Firms

As the competition for artificial intelligence (AI) investment intensifies, analyses show that cash flow for big tech companies is decreasing while cash flow for semiconductor companies is increasing. According to Bank of America (BofA) Global Research, big tech firms like Amazon, Microsoft, and Meta, which bear the costs of building AI infrastructure, are experiencing a decline in free cash flow, whereas semiconductor companies like Nvidia and Micron are seeing direct benefits. This year, the capital expenditures of hyper-scalers included in the 'Magnificent 7' are expected to reach a total of $234 billion, yet their stock prices remain stagnant. While AI chip sales yield immediate results, platform companies must first bear the costs of building servers and data centers, which delays profit generation. Torsten Slok, chief economist at Apollo Global Management, warns that the pace of AI investment recovery may be overly optimistic, pointing to the decline in AI token prices and the rapid growth of Chinese AI models as risk factors. However, if the expansion of AI usage and the successful monetization of high-value services occur in the long term, the current large-scale investments could be seen as a precursor to building the next-generation platforms.