Hyperscaler capex is the demand line for the semiconductor industry, and the market is pricing the two sides of that transaction very differently. Spending estimates keep climbing, but the equity returns have accrued to the suppliers, not the spenders. The combined AI capex from Alphabet, Amazon, Meta, Microsoft, and Oracle sat near $155 billion through 2023, then accelerated to roughly $400 billion in 2025, with estimates of $770 billion this year and nearly $1 trillion in 2027. The projected two-year increase from 2025 to 2027 — approximately $565 billion — exceeds everything the group spent from 2022 through 2024 combined.
Gartner’s breakdown shows where the dollars concentrate: AI infrastructure runs from roughly $1 trillion in 2025 to nearly $1.9 trillion by 2027, more than services and software combined. Everything downstream — cybersecurity, models, development platforms — is a rounding error next to the hardware layer.
Indexed to November 2022, the SOX and the UBS Hyperscalers Index moved together for three years before semis broke away in the first half of 2026 — chipmakers are up more than 4x against roughly 2.6x for their largest customers. The suppliers are outperforming the buyers of their own product, a spread that either sustained capex growth justifies or mean reversion eventually closes.
I know I am beating a dead horse, but the data doesn’t lie. You cannot have the semiconductor suppliers compounding infinite margin expansion while their primary customers burn through free cash flow without eventually hitting a massive wall. Once the scarcity narrative normalizes and hyperscalers are forced to justify these expenditures to shareholders, the current setup points to a violent mean reversion. Having said that, I do think the hyperscalers look interesting and while rich, offer a better relative risk reward than the hardware names. For now, realized correlations are low along with the VIX.
Last week I mentioned the possibility of Mag7 names violently reverting performance back into themselves. I think the price action here is confirmed with this move off the low with massive DeMark 13 combo and 9 setups.
