The Next Major Market Cycle Is Already Loading, And Buffett's Berkshire Just Put $10 Billion On It
- Checkers
- 2 days ago
- 4 min read
A company posting the biggest profits in its history while its stock gets cheaper by the month is a company the market expects the spending to bury. Meta was that company in 2022, losing two thirds of its value before returning more than fivefold in under two years once the spending dialed back. Now, that same setup sits inside three companies that more or less own the current AI economy.
Nearly everything in AI runs on rented computing, and the three companies that sell it control roughly two thirds of the world's cloud infrastructure. All three set all-time highs between October 2025 and May 2026, then sold off through the first half of this year. The biggest of them gave back more than a quarter of its value from its record October close, even while reporting over $101 billion in annual net profit. Together with Meta, these three plan to pour around $725 billion into data centers in 2026, up more than 75% from last year, spending UBS calculated will consume nearly 100% of operating cash flow across the largest hyperscalers against a ten-year average of 40%, and their free cash flow cratered under the weight.
More than $1.4 trillion in contracted future revenue now sits across the three companies, capacity sold before it exists, and consensus puts spending growth across the broader hyperscaler set decelerating from 84% this year to around 22% in 2027. The moment the construction bill stops growing while those contracts keep converting, the vanished cash flow comes back into stocks that were repriced for its absence. Meta ran that recovery as a single company worth less than $250 billion at its lows, while the same turn, run across these three giants, would move roughly ten trillion dollars of market value.
Microsoft (NASDAQ: $MSFT)
Microsoft earned $149 billion in operating profit over the trailing year, nearly double the $78.5 billion it made in calendar 2021, and the market cap barely moved across that entire stretch. The stock now trades around 23x profits against a five-year average north of 30x, the deepest discount of the three against its own history. It carries the group's largest contracted backlog, $627 billion in future revenue commitments disclosed in its March quarter, up 99% from a year earlier. The AI business driving those commitments passed a $37 billion annual run rate growing 123%, and the balance sheet funding all of it holds a AAA rating only one other American company can claim. Nowhere else does the setup come this cheap with this much of the growth already signed.
Amazon (NASDAQ: $AMZN)
Amazon more than tripled its operating income since 2021, from $24.9 billion to $80 billion last year, while the stock gained about 45% over the same stretch. It also spent the most relative to what it generates, around $200 billion this year, and its trailing free cash flow fell 95% to $1.2 billion after equipment purchases jumped nearly $60 billion in a year. The cash that disappeared into equipment purchases comes back the moment those purchases stop growing, and since more of it vanished here than anywhere else, more of it comes back here too, with analyst models putting free cash flow near $50 billion in 2027 after a negative 2026. The demand behind that recovery is already signed, with $364 billion of AWS backlog as of March before counting new OpenAI agreements or an Anthropic deal worth over $100 billion. On top of that backlog, AWS grew 28% last quarter, its fastest pace in fifteen quarters, and the in-house chip business blew past a $20 billion run rate on triple-digit growth.
Alphabet (NASDAQ: $GOOGL)
Alphabet is the only one of the three not trading at a discount to its own history, at roughly 27x earnings against a recent average near 25x. Cloud grew 63% last quarter, carrying the unit past $20 billion for the first time, and the backlog behind it roughly doubled in a single quarter to more than $460 billion, with about half converting to revenue within 24 months. In June Alphabet priced an $84.75 billion equity raise, the first by any of these companies this cycle, out of a business that generated $164 billion in operating cash flow in 2025. Berkshire Hathaway took $10 billion of it in a private placement, after tripling its Alphabet position in the first quarter, the same quarter it exited Amazon entirely and cut its portfolio to just 29 stocks.
The discount vanishes once the fear is gone
The return of free cash flow the whole setup rests on is still only a forecast, one every big spender contradicted by raising its 2026 budget at the last round of earnings. Michael Burry spent November arguing the record profits lean on hardware that loses value faster than the books admit, and an MIT study put 95% of enterprise AI pilots at no measurable profit, the same sort of doubts Meta faced at $90 before the run to $500. The version of the spending actually worth fearing sits at Oracle (NYSE: $ORCL), which built its $638 billion backlog on borrowed money, ran free cash flow to negative $23.7 billion doing it, and leans on a single customer, OpenAI, for roughly $300 billion of that backlog. The market spent nine months betting the spending breaks these companies, and Berkshire just put $10 billion on the other side of that bet.
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