The 1 Chart Every AI Investor Needs to See Before Buying Anything Right Now

Massive stock price appreciation has often defined artificial intelligence (AI) investing in recent years. A considerable amount of investor dollars has flowed into such companies, particularly for some top tech stocks.

The added attention has some investors focused on returns or, in some cases, valuation. However, one chart shows a different, perhaps surprising, metric that may actually signal future gains for a few "Magnificent Seven" stocks.

Image source: Getty Images.

The critical metric

The metric that is raising concerns is capital expenditures (capex). And the chart below shows how much they have grown in the past few years.

In reality, this is four charts in one that shows capex spending for four of the top hyperscalers: Meta Platforms (NASDAQ: META), Microsoft (NASDAQ: MSFT), Google parent Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG), and Amazon (NASDAQ: AMZN). These companies plan to spend a combined $725 billion in capex in 2026 alone.

Data source: Statista.

The sheer volume of investment dollars may lead investors to question the wisdom of such spending, even among the companies best able to afford it. However, these companies represent some of the largest cash hoards in the tech industry. That gives them an advantage in what has become a capex arms race.

Moreover, they continue to generate positive free cash flows despite the added spending. This is an amazing feat considering that free cash flow is a figure that subtracts capex spending. Still, Amazon's free cash flow fell to just $1.2 billion over the trailing 12 months, down from $26 billion in the previous 12-month period, a decline that could spark concerns about future cash flow.

Data source: Company earnings reports.YOY = Year over year. Note: Microsoft figures are for fiscal 2026's Q3 (ended March 31, 2026), except for 2025 revenue growth, which is for fiscal 2025 (ended June 30, 2025).

More importantly, all four have experienced improved revenue growth related to AI. Due to Microsoft's different fiscal year, its growth appears more muted. Azure revenue grew by 40% in both the third quarter of fiscal 2026 (ended March 31) and the first nine months of fiscal 2026, up from 34% in fiscal 2025.

Even though Microsoft did not progress as rapidly as its Magnificent Seven peers, the numbers show accelerated growth in its AI-related businesses. That makes the massive outlays not only more understandable but also more likely to pay off for the company and its investors.

Big tech and capex

Before buying another share of an AI stock, investors need to analyze the capex charts for the four Magnificent Seven companies to better understand their rapidly increasing capex spending and its effects.

Indeed, the $725 billion in capex spending appears alarming, even for many of the top AI companies in the Magnificent Seven. Should these initiatives fail, it could strain each company's financials for a time, a possibility few analysts would have considered realistic before the increases in capex spending.

Nonetheless, all four companies have benefited from accelerated growth in their AI-related businesses. Investors should confirm that this trend continues in each of these companies' upcoming earnings reports, but as long as more capex drives faster growth, they should welcome increased spending rather than sell their AI stocks because of it.

Will Healy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, and Microsoft. The Motley Fool has a disclosure policy.