NVIDIA, Micron Stocks: BofA Projects $430B Free Cash Flow Surge

NVIDIA, Micron, Broadcom, and Applied Materials are projected to generate a combined $430 billion in free cash flow over the next 12 months, according to Bank of America estimates reported by Yahoo Finance on July 14. This represents more than triple the level these semiconductor companies produced 2 years ago, driven by unprecedented demand for artificial intelligence chips. In contrast, hyperscalers Amazon, Alphabet, Meta, Microsoft, and Oracle are expected to see their free cash flow turn negative for the first time, erasing the $260 billion peak recorded in 2024. The divergence reflects Wall Street's growing impatience with Big Tech's record AI-related capital expenditures, which are projected to surge 70% year-over-year to $700 billion this year.

BofA Projects $430B Semiconductor Free Cash Flow Surge

Bank of America's analysis forecasts that NVIDIA, Micron, Broadcom, and Applied Materials will collectively generate $430 billion in free cash flow over the next 12 months. This figure is more than three times the amount these companies produced 2 years ago, according to the BofA estimates cited by Yahoo Finance. The Kobeissi Letter described the shift: "Semiconductor manufacturers are becoming 'cash machines' while AI giants are burning record amounts of capital."

Hyperscaler Capital Expenditures Push Free Cash Flow Negative

Amazon, Alphabet, Meta, Microsoft, and Oracle are expected to see their combined free cash flow decline into negative territory for the first time. This marks a reversal from the $260 billion peak these hyperscalers recorded in 2024, according to the BofA projections. The decline is attributed to AI-related capital expenditures, which are forecast to reach $700 billion this year — a 70% increase year-over-year.

Magnificent 7 Stocks Trade at Decade-Low Valuations

The Magnificent 7 stocks are currently trading at their cheapest valuations in 10 years. The valuation premium of the M7 relative to the S&P 500 index has compressed to 10%, down from the 30%+ premium maintained throughout most of the 2020s, according to the report.

FAQ

What did Bank of America project for semiconductor companies' free cash flow?

Bank of America projected that NVIDIA, Micron, Broadcom, and Applied Materials will generate a combined $430 billion in free cash flow over the next 12 months, more than triple the level from 2 years ago.

Why are hyperscaler companies seeing negative free cash flow?

Hyperscalers Amazon, Alphabet, Meta, Microsoft, and Oracle are expected to see their free cash flow turn negative for the first time due to record AI-related capital expenditures projected to reach $700 billion this year, up 70% year-over-year.