Why Big‑Tech AI Capex Is a Hidden Buying Chance (Or a Trap)

• Future Fund’s Gary Black spots a "discount" in hammered big‑tech names despite $630B AI capex plan.
• Capex spikes are front‑loaded; the real earnings hit spreads over five years, softening short‑term pain.
• PE and PEG ratios show Alphabet and Meta still look cheap relative to projected earnings growth.
• History repeats: 2015‑2017 AI hype and 2020‑2022 cloud build‑outs produced similar market overreactions.
• Bull case: AI spend fuels revenue acceleration; Bear case: ROI falls short of cost of capital, prompting a pull‑back.

Most investors dismissed the AI capex surge as a warning sign. That could be their biggest mistake.

Why Future Fund’s Bullish Call on Big‑Tech AI Capex Matters

Gary Black, managing partner of Future Fund, went public on X stating that the recent hammering of large‑tech stocks creates a buying window. His thesis hinges on three financial mechanics that many retail analysts overlook.

How 2026 AI Capital Expenditure Shapes the Tech Sector

The five biggest U.S. tech firms have collectively pledged more than $630 billion in AI‑related capital spending for 2026—over twice the 2025 level. Amazon alone earmarks $200 billion, Alphabet $175‑185 billion, and Meta $115‑135 billion. This wave of investment is being described as a "once‑in‑a‑generation" infrastructure build‑out, echoing the data‑center boom of the early 2010s.

From a sector perspective, the AI spend drives demand for semiconductor equipment, cloud services, and data‑center real estate. The ripple effect is already visible: semiconductor stocks rallied after Nvidia’s CEO Jensen Huang called the spend “appropriate and sustainable,” lifting the Nasdaq‑100 2.15% and pushing the Dow past 50,000.

Competitive Landscape: Google, Meta, Amazon, Microsoft & Nvidia

Even though the headline numbers look daunting, the relative valuation tells a different story. Alphabet trades at a 2026 forward price‑to‑earnings (P/E) of 28× with a 20% long‑term earnings‑per‑share (EPS) growth outlook, delivering a PEG (price/earnings‑to‑growth) of 1.4×. Meta’s forward P/E sits at 22× with 18% EPS growth, yielding a PEG of 1.2×. Both are below the historical tech‑sector average PEG of ~1.8, implying they are priced for modest growth—exactly the sweet spot for value‑oriented growth investors.

Microsoft, while not mentioned in Black’s tweet, posted a 2026 forward P/E of roughly 30× and a PEG near 1.5×, still within a reasonable range. Nvidia, the AI hardware king, enjoys a premium valuation but benefits from the same AI spend tailwinds, making its earnings trajectory more volatile yet potentially more rewarding.

Historical Precedents: When Capex Surges Turned into Value

Investors have faced similar dilemmas before. In 2015‑2017, a wave of AI hype drove several AI‑centric ETFs to double‑digit gains before the market corrected as ROI lagged behind expectations. More recently, the 2020‑2022 cloud‑infrastructure spend saw companies like Amazon and Microsoft accelerate capex, yet earnings only caught up in 2023‑2024 after the initial outlay was amortized over multiple fiscal years.

What these cycles share is a pattern: capex spikes at the start of a fiscal year, a period of earnings compression, followed by a gradual amortization that lifts margins in later years. Black’s argument mirrors this historic playbook—expect a short‑term earnings dip, then a longer‑term earnings lift as the AI infrastructure begins to generate cash flow.

Technical Definitions Every Investor Should Know

Capex (Capital Expenditure): Money spent on long‑term assets such as data centers, servers, and equipment. Unlike operating expenses (OPEX), capex is capitalized on the balance sheet and amortized over its useful life, usually five years for tech assets.

Amortization: The accounting method of spreading the cost of an asset over its expected life, reducing the impact on any single year’s profit.

PEG Ratio: The price‑to‑earnings ratio divided by the projected EPS growth rate. A PEG below 1 often signals a stock is undervalued relative to its growth prospects.

ROI vs. Cost of Capital: Return on investment must exceed a firm’s weighted average cost of capital (WACC) to create shareholder value. If ROI falls short, the capex is considered value‑destructive.

Investor Playbook: Bull vs. Bear Scenarios

Bull Case

• AI spend accelerates revenue growth for Google and Meta as ad and cloud services capture higher margins.
• Amortization smooths earnings impact; FY27‑FY29 profit margins expand beyond 30%.
• Semiconductor ecosystem benefits, leading to a secondary rally in chip‑makers and equipment suppliers.
• Valuation multiples compress modestly, delivering upside of 20‑30% for current price levels.

Bear Case

• ROI on AI assets lags WACC, forcing firms to write down projects and cut future capex.
• Margin pressure persists through FY28, eroding earnings and triggering a broader tech correction.
• Regulatory scrutiny on AI data usage curtails monetization pathways, especially for Meta’s ad platform.
• Valuations fall further, potentially delivering double‑digit declines for the “cheap” stocks.

Positioning now hinges on your risk tolerance. If you believe the AI wave will translate into sustainable cash flow, consider adding Google and Meta at their current forward P/E levels. If you’re wary of an ROI shortfall, a defensive stance—perhaps scaling back exposure or using options to hedge—might preserve capital while you wait for the earnings narrative to clarify.