One chart reveals why investors are concerned about earnings from Microsoft, Amazon, and other hyperscalers

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Investors in AI hyperscalers are set to digest yet another huge quarter of capital expenditures when results begin to trickle in later this month.

The unanswered question: Are the free-spending ways of tech execs finally reflected in the much lower stock valuations of their companies?

Big Tech capital expenditures/sales are expected to reach an all-time peak in the third quarter of this year, Barclays strategists pointed out in a new note (chart below). That essentially means aggressive AI spending continues to yield limited impact on sales and, by extension, profits.

Concerns in the market about hyperscaler capital expenditures aren't too hard to find.

All "Magnificent Seven" stocks have underperformed the S&P 500 ( ^GSPC ) in 2026 except for Alphabet ( GOOG , GOOGL ), which has notched a 15% year-to-date gain versus the benchmark index's 9.5% advance.

The companies that make up the Magnificent Seven are Nvidia ( NVDA ), Microsoft ( MSFT ), Alphabet, Amazon ( AMZN ), Meta Platforms ( META ), Apple ( AAPL ), and Tesla ( TSLA ).

Why are Magnificent Seven stocks underperforming the market?

Meanwhile, Oracle ( ORCL ) stock is hovering near a 52-week low.

Wall Street is growing increasingly impatient with Big Tech's astronomical capital expenditures on artificial intelligence, projected to balloon 70% and exceed $700 billion this year.

This aggressive, unyielding infrastructure spending on data centers and high-end GPUs has heavily cannibalized corporate cash generation. The Magnificent Seven's collective 12-month forward free cash flow is expected to drop sharply from its 2024 peak.

"For me, it's going to be about earnings [with the Mag 7]. It's going to be about the capex number. What's happening with free cash flow. And what is their guidance and how we turn all of this into real money sooner than later," Sevens Report Research founder Tom Essaye said on Yahoo Finance's Opening Bid .

Essaye is staying cautious about the Magnificent Seven names heading into earnings.

Brian Sozzi is Yahoo Finance's Executive Editor, host of the ' Power Players With Brian Sozzi' podcast and a member of Yahoo Finance's editorial leadership team. Follow Sozzi on X @BrianSozzi , Instagram , and LinkedIn . Tips on stories? Email brian.sozzi@yahoofinance.com.

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