A chart this week from Bank of America ricocheted around Wall Street and Silicon Valley, capturing the “generational transfer” of profits in the AI ecosystem. Huge capital expenditures are collapsing big tech companies’ free cash flow, a metric prized by shareholders. Meanwhile, the less sexy companies that make the processing and memory chips that underpin AI models are raking in cash.
As we wrote earlier this week, investors have been chasing the chokepoints around AI in search of the next winner. Bets have shifted from the LLMs themselves (not that they’re having trouble raising money yet) to the infrastructure to house them, the applications to support them and, most recently, to the memory chips that make them work.
This trend could ease as hyperscalers outsource more of their costs to private equity and chipmakers ramp up their own capex, but this represents the starkest snapshot we’ve seen of where the value from AI is moving.
