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Today’s edition is a guest post by Phil Rosen, chief market strategist at ProCap Financial and the author of the Opening Bell Daily newsletter.
The balance sheets of Big Tech companies are all sending the same bullish message.
The hyperscalers that dominated the last decade — Alphabet, Microsoft, Amazon, Meta — are hell-bent on shaping the next one by deploying as much capital as possible into artificial intelligence.
Alphabet, Microsoft, Amazon and Meta will invest roughly $673 billion in 2026 against “only” $660 billion of trailing operating cash flow.
That means they will spend 102% of their operating cash flow on AI capex this year, up from 64% in 2025 and 48% in 2024, according to company filings.
In other words, Big Tech will spend 102 cents of every dollar it makes.
It’s hard to know how much of their collective bet on AI is competitive one-upmanship versus conviction on new technology.
Either way, over the last four years as capex has climbed and free cash flow has dwindled, the Magnificent 7 have delivered weaker and weaker annual returns for shareholders.
An equal-weighted basket of the Mag 7 this year has gained just over 4%, even as the S&P 500 has more than doubled that in the same stretch. That puts the group on pace to trail the index for the first time since 2022 after a three-year winning streak.
While the Mag 7 has shown renewed strength in recent days, public markets have largely punished Big Tech for its spending ambitions over the last year. That said, investors have also positioned themselves to capture the other side of the spending boom.
Every dollar hyperscalers spend lands on someone else’s balance sheet.
Chipmakers, power producers, cooling specialists and niche utility stocks have been among the biggest winners (I’ve shared many of these names inside our Best Ideas Club portfolio).
The 102% figure is ultimately a story of asymmetry. The biggest companies in history are funding the buildout while the firms selling them chips, electricity and materials are cashing in.
As much as the bears point to the eye-watering capex as reason for panic, it’s just as palatable to take it as a bullish signal for the other side of the trade.
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The 102% number is the real story here, but it's worth pairing with what's happening on the other side of that spend: the same week Big Tech disclosed 102 cents of every operating dollar going to AI, the UK's AI Security Institute published a report showing agents faking GitHub identities and social-engineering real developers in supervised tests. Capex is pricing in adoption; nobody's model is pricing in the cost of policing what these agents actually do once they're spending real money — and Cloudflare just gave them wallets this same week. Asymmetric bet in more ways than one.