Will the AI's enormous debt sink the Magnificent Seven?
Could the massive debt (or more precisely, the massive capital expenditure) driven by artificial intelligence sink the Magnificent Seven by 2026?
The Magnificent Seven (Apple, Microsoft, Alphabet, Amazon, Meta, Nvidia, and Tesla) have been at the center of one of the most impressive investment runs in recent history. In 2026 alone, projections place their combined capital expenditure (capex) at around $680-700 billion, with the vast majority earmarked for AI infrastructure: data centers, advanced chips, networks, and the energy needed to train and run increasingly large models.
Amazon is leading the charge at around $200 billion, Alphabet up to $185 billion, Microsoft on track for $144-150 billion (adjusted for fiscal year), Meta between $115-135 billion, and the rest round out the picture. This represents a 60-70% jump compared to 2025 in several cases, and is equivalent to a significant percentage of these companies' operating cash flow.
Herein lies the key question: is it sustainable? We already saw signs of strain in 2025. The collective free cash flow (FCF) of hyperscalers (Amazon, Microsoft, Alphabet, Meta) fell sharply in some quarters, with Amazon burning through net cash in several periods and Meta/Amazon allocating more than 60-90% of their operating cash flow to capital expenditures (capex). Several firms have increased their debt issuance—directly or through special vehicles—to finance this AI arms race. UBS estimates that tech/AI-related debt could approach $1 trillion globally by 2026.
However, comparing this to the dot-com bubble of 2000 would be inaccurate. That crisis destroyed companies with no real revenue or solid balance sheets. Today, the Magnificent Seven generate hundreds of billions in annual net profits, with record operating margins in many cases (especially Nvidia and Microsoft). Their balance sheets remain robust, with manageable debt-to-equity ratios and high liquidity. Furthermore, their capital expenditures aren't "burning cash": they're creating productive assets (AWS, Azure, Google Cloud, H200/Blackwell chips) that are already generating increasing returns.
The real risk isn't literal bankruptcy—none of these giants are anywhere near that—but rather the disappointment of expectations. If the returns from AI (new subscription services, massive productivity, hyper-personalized advertising, autonomous agents) don't arrive quickly and on a sufficient scale to justify this level of investment, the market could severely punish valuations. We already saw episodes of volatility in 2025 when the narrative shifted from "infinite AI" to "where are the massive revenue streams?"
In short: AI “debt” (actually massive spending financed by cash and some debt) won’t sink the Magnificent Seven in the sense of bankruptcy. Their financial strength and dominant position protect them. But it could trigger a severe correction or years of underperformance if AI monetization disappoints in 2026-2027. The question isn’t whether they’ll go bankrupt, but whether they’ll remain “magnificent” after spending the equivalent of the GDP of medium-sized countries on a single technology.
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