Hyperscaler spending is exploding, but not every supplier can keep free cash flow (FCF) positive as supply chains tighten. Here’s a sober, data-driven scan of who’s funding the AI build-out comfortably—and who might be leaning hard on working capital or debt.
1) The demand engine: hyperscaler capex just went up—again
The four U.S. giants are still stepping harder on the accelerator:
- Alphabet (Google) lifted its full-year 2025 capex outlook to about $85 billion, citing servers and a faster pace of data-center construction. That’s a $10 billion bump from prior guidance and one of the clearest single datapoints that the AI build-out is accelerating, not cooling. (Alphabet Investor Relations)
- Meta now expects $66–$72 billion of 2025 capex (incl. finance-lease principal), explicitly tied to AI infrastructure (data centers, servers). Meta’s guidance was reiterated in its IR materials and prepared remarks. (Meta, s21.q4cdn.com)
- Microsoft signaled “more than $30 billion” in capex next quarter—its highest quarterly spend yet—after reporting a strong FY25 Q4. Management framed this as continued scaling of the AI stack. (Seeking Alpha, The Motley Fool, Microsoft)
- Amazon disclosed $31.4 billion of capex in Q2 alone, and said that pace is a reasonable proxy for the remaining quarters—implying well above $100 billion for 2025, driven primarily by AWS infrastructure. (Data Center Dynamics, Amazon, Q4 Capital)
Meta’s capex push is also being financed creatively: a $29 billion data-center financing led by PIMCO and Blue Owl for a Louisiana AI campus underscores how capital markets are being tapped to keep projects moving. (Reuters)
Takeaway: Aggregate cloud/AI capex is still climbing into 2H25, a backdrop that typically supports the upstream supply chain (chips, optics, power/thermal, equipment)—provided suppliers can ship and keep cash conversion intact.
2) Supplier scorecard: who’s growing and throwing off cash?
Semiconductors (logic & memory)
- NVIDIA posted $44.1 billion in Q1 FY26 revenue (period ended Apr 27, 2025), with data-center revenue $39.1 billion. Cash from operations hit $27.4 billion in the quarter per CFO commentary—an extraordinary firehose funding massive working-capital needs without stressing the balance sheet. (NVIDIA Newsroom, SEC)
- Broadcom continues to be a cash machine: in Q2 FY25, free cash flow was $6.4 billion, with AI networking revenue up 46% YoY to over $4.4 billion. (Broadcom Investors)
- Micron has flipped the memory cycle in its favor. In fiscal Q3 2025, adjusted FCF was $1.95 billion as HBM and data-center DRAM led results. Management noted multiple records and a robust HBM ramp. (Micron Technology)
- Marvell is benefiting from custom silicon and data-center networking; revenue momentum is clear, though the company doesn’t boast the same FCF heft as Broadcom. (Marvell Investors)
Why this matters: Rising FCF at the biggest AI chip and memory suppliers provides internal funding for capacity adds (HBM, packaging) without resorting to dilutive raises, dampening financing risk.
Optics & networking
- Arista Networks delivered a strong Q2 2025 and raised its 2025 revenue growth outlook, reflecting big cloud wins (notably Microsoft and Meta). Arista’s profitability profile gives it unusual cushion as Ethernet pushes deeper into AI fabrics. (Arista Investors, Investors)
- Ciena swung back to profit with Q2 revenue up to $1.13 billion, pointing to AI-driven demand for high-speed connectivity; it’s a reminder that compute spend eventually pulls through to the network. (SEC, The Wall Street Journal)
- Lumentum remains in restructuring mode: Q2 FY25 revenue was $402 million with a GAAP loss, though management highlighted robust datacom laser demand earlier in FY25. The recovery path is underway but uneven. (Lumentum, Investing.com)
Power, thermal & data-center infrastructure
- Vertiv printed 35% YoY sales growth to $2.64 billion in Q2 2025 and raised guidance, with reports of a record $8.5 billion backlog tied to AI thermal and power systems. Strong orders + pricing discipline = better odds of keeping FCF in the black. (Vertiv Investors, Nasdaq)
Equipment & advanced packaging
- ASML posted €7.7 billion Q2 net sales and €5.5 billion in net bookings (including €2.3 billion EUV). That backlog and margin profile help it fund its own expansions—and, by extension, the broader node migrations powering AI. (ASML, Our Brand)
- TSMC continues expanding advanced nodes and packaging; management discussed CoWoS capacity expansion on its July Q2 call—key context given the industry’s packaging bottlenecks. (Several independent trackers also show step-ups in 2025 capacity.) (TSMC, Nomad Semi)
3) Backlog visibility vs. cancellation risk
Two tensions coexist:
- “All-systems-go” signals. Alphabet lifted capex; Meta raised capex ranges; Microsoft and Amazon are running at historically high quarterly spend rates—visible demand for servers, power gear, optics, and litho should remain solid into 2026. (Alphabet Investor Relations, Meta, Seeking Alpha, Data Center Dynamics)
- Execution choke points. Advanced packaging and HBM supply remain multi-quarter gating factors. TSMC is adding CoWoS capacity, but demand is intense; industry trackers still describe 2025 as tight before broader relief arrives. Meanwhile, research houses flag that HBM pricing could cool in 2026 as more capacity arrives, which would flow through to AI server BOMs and margins. (TSMC, TrendForce)
Bottom line: Backlogs look sturdy, but the shape of deliveries—and cash conversion—still depends on packaging slots, HBM availability, and construction timelines for new DCs.
4) Margin sensitivity: memory & packaging costs matter
- On the memory side, the swing factor is HBM. Micron’s HBM ramp is driving revenue and margin improvement now; analysts, however, debate how 2026 pricing shakes out as more supply comes online. If HBM prices ease next year, AI system integrators could see better margin math; if not, pressure persists for OEMs with slim gross margins. (Micron Technology, TrendForce)
- On packaging, capacity additions (CoWoS lines and substrate supply) are crucial. As these bottlenecks thaw, the per-system cost/lead-time should improve, supporting more predictable cash cycles for server OEMs and their component suppliers. (TSMC)
5) Stretch watch: who may feel the cash crunch first?
- High-growth OEMs with big working-capital needs can show volatile quarterly FCF if receivables and inventory swell. Supermicro’s latest results highlighted inventory builds and mixed margins even with a robust FY26 revenue outlook—useful context for how growth can temporarily strain cash. (s204.q4cdn.com)
- Optical component makers at the lower end of the stack (e.g., certain laser or module vendors) often carry thinner gross margins; when big customers adjust mix or push for pricing, FCF can wobble even as top-line grows. Recent Lumentum prints illustrate the trek back toward sustained profitability. (Lumentum)
By contrast, mega suppliers with pricing power (NVIDIA, Broadcom) and memory vendors on the upslope (Micron) are currently funding growth with internally generated cash. (Broadcom Investors, Micron Technology, NVIDIA Newsroom)
6) What to watch in the next 10 days
- Applied Materials (Aug 14)—AI tool demand, any color on advanced packaging and high-NA EUV supply chains. (ir.appliedmaterials.com)
- Cisco (Aug 13)—AI networking order trends and Splunk synergies; any hints on Ethernet vs. InfiniBand traction for AI clusters. (investor.cisco.com)
- TSMC monthly sales cadence—July posted strong YoY; August print next month will help validate the 2H node and packaging ramps. (TSMC)
- NVIDIA (Aug 27, just beyond 10 days)—data-center revenue cadence and cash-flow dynamics as Blackwell ramps. (NVIDIA Newsroom)
7) How to read the space without taking trading risk
- Separate demand from delivery. Hyperscaler capex guides show intent; packaging/HBM constraints dictate timing. Pair both to gauge quarter-to-quarter cash conversion risk. (Alphabet Investor Relations, TSMC)
- Favor balance-sheet resilience in your analysis. Suppliers with healthy FCF and net cash can navigate BOM inflation and lead-time surprises with less financing risk (see Broadcom, Micron’s latest prints). (Broadcom Investors, Micron Technology)
- Follow the plumbing. Power/thermal vendors (e.g., Vertiv) and optical/network firms (e.g., Arista, Ciena) are mission-critical: hyperscaler capex ultimately pulls them through. Backlogs and book-to-bill trends are high-signal. (Vertiv Investors, Arista Investors, SEC)
The bottom line
AI capex is still cresting higher into late-2025. For now, the leaders closest to the compute core and networking fabric are balancing growth and cash generation. The more capital-intensive, lower-margin tiers (or companies scaling at breakneck speed) face a tougher FCF juggling act until packaging and memory bottlenecks ease.
Disclosure & important information
The information above is for general informational and educational purposes only and does not constitute investment, financial, legal, or tax advice. Markets change quickly—always verify key facts and figures against the latest company filings, earnings materials, and regulatory disclosures before making decisions. We have cited primary sources where possible (company investor-relations pages, official press releases, major wire services). No specific securities are being recommended, and nothing here should be interpreted as a solicitation to buy, sell, or hold any investment. If you need advice tailored to your situation, please consult a licensed professional.