Advanced Micro Devices will sell Anthropic tens of billions of dollars' worth of AI servers and invest as much as $5 billion in the Claude maker, solidifying a trend of unprecedented capital concentration among global tech giants. This deal, set to begin in the first half of 2027, marks a new phase in the buildout of a vast digital infrastructure, largely outside national oversight. The announcement reveals the latest “circular deal” in the AI industry, where chipmakers funnel capital into the very AI firms that rank among their largest customers. Nvidia, a rival, has been in talks to invest $30 billion in ChatGPT creator OpenAI, illustrating the deep financial entanglement within this emerging digital oligarchy.
Anthropic, a key player in Silicon Valley's artificial intelligence race, desperately needs computing capacity. Its enterprise tools, like Claude Code, have seen strong adoption, driving demand for more processing power. Tom Brown, co-founder and compute head at Anthropic, stated, “Access to compute is central to keeping Claude at the frontier and meeting demand from our customers,” a clear admission of the insatiable hunger for resources.
The New Digital Oligarchy
This isn't Anthropic's first move to overcome capacity constraints. In May of the same year, it agreed to rent the full computing power of SpaceX's Colossus 1 facility in Memphis, a site housing over 220,000 Nvidia processors and providing 300 megawatts of new capacity. Meta Platforms is also reportedly in talks to lease computing power to Anthropic in a potential deal worth up to $10 billion over two years, according to a source familiar with the matter last week. Under the latest AMD deal, Anthropic plans to use some chips in its own data centers while leasing additional capacity through cloud providers and new AI cloud companies. AMD was also reportedly in talks to provide a financial backstop for Anthropic's future data-center leases, further entrenching the financial ties. Shares of the Santa Clara, California-based AMD rose 2.4%, having more than doubled in value so far this year, demonstrating the market's enthusiasm for this elite-driven expansion. In October of the same year, AMD announced a multi-year deal with OpenAI, projected to bring in tens of billions of dollars in annual revenue, while giving the ChatGPT creator the option to buy up to roughly 10% of the chipmaker.
The Cost of Elite Ambition
While these transnational tech giants — Microsoft, Alphabet, Amazon, Meta Platforms, and Oracle, often called “hyperscalers” — are beginning to show returns on their artificial intelligence investments, the escalating cost of this massive buildout is significantly eroding their free cash flow. Investors are taking notice. A Reuters analysis of LSEG consensus estimates projects these hyperscalers will collectively spend more on capital expenditures than they generate in free cash flow by 2027. The data indicates these companies will generate approximately $340 billion more in annual operating cash flow in 2027 than in 2025, yet capex is expected to surge by roughly $534 billion. This equates to about $1.57 of additional investment for every $1 of additional cash flow, a staggering imbalance.
Shay Boloor, chief market strategist at Futurum Equities, noted that “Investors are underestimating how fundamentally AI is changing the Big Tech business model.” He added that these companies, historically valued as “asset-light platforms” where revenue scaled faster than capital requirements, are now being pushed toward a “hybrid model.” In this new paradigm, software, advertising, and cloud economics increasingly depend on enormous physical infrastructure spending, creating a tangible, resource-intensive foundation for their digital empires.
Financial Strain on the Hyperscalers
These capex estimates encompass all spending, not just AI-related expenditures, as companies don't consistently disclose AI-specific investments. However, executives confirm that AI demand largely drives spending on data centers, servers, networking equipment, and other cloud infrastructure. The spending outlook remains volatile; current-year consensus estimates for the five companies' capex have jumped from about $485 billion in January to around $730 billion in July, highlighting the rapid escalation of this digital arms race. Despite some signs of AI spending paying off, such as Microsoft's AI business surpassing a $37 billion annual revenue run rate and Amazon reporting 28% growth at its AWS unit in its first quarter, the financial pressure is mounting.
The primary concern for investors is whether AI-related cash generation will falter while spending persists at these elevated levels. Microsoft reported $35.8 billion in operating cash flow in its fiscal second quarter, yet recorded $37.5 billion of capital expenditures, including finance leases. David Russell, global head of market strategy at TradeStation, bluntly stated, “Earnings growth may not be enough to justify investment if capex is depleting cash. Companies exist to make money, not spend money.” Amazon's trailing 12-month operating cash flow rose 30% to $148.5 billion in the first quarter, but its free cash flow plummeted to $1.2 billion. Oracle, in particular, has seen its shares lose 36% so far this year as its free cash flow turned negative. Its capex as a percentage of operating cash flow soared from 47% in fiscal 2022 to 174% for fiscal 2026, which ended in May of the same year. Oracle's capex reached $55.7 billion in its most recent fiscal year, compared with operating cash flow of $32 billion, forcing it to plan raising $45 billion to $50 billion through debt and equity to fund cloud infrastructure expansion. While Microsoft, Alphabet, and Meta still generated enough free cash flow to cover dividends and buybacks in their latest fiscal years, these shareholder returns could be at risk if spending remains high and AI monetization takes longer than anticipated. Freddy Lavric, senior trader at Winthrop Capital Management, warned that “Over the next two to three years, companies need to show that AI is driving incremental revenue, expanding margins and improving cash flow.” He concluded, “If those financial benefits aren't becoming evident by then, the market will start questioning whether the investment cycle has gone too far,” underscoring the precarious nature of this elite-driven technological expansion.