Four chip suppliers outgenerated Nvidia in third-quarter cash flow

Grace Kim

Four semiconductor suppliers—Samsung, SK Hynix, Micron and Taiwan Semiconductor Manufacturing Company Limited (TSMC)—each generated more free cash flow in the third quarter than Nvidia or any other listed U.S. company, according to Chief Macro Strategist Sonu Varghese.

Free cash flow (FCF), meaning cash generated by operations after capital expenditure (capex), places three memory manufacturers and one chip foundry ahead of Nvidia in the same measure. The data-center buyers financing that expansion, large cloud operators known as hyperscalers, are absorbing the opposite side of the trade.

Varghese made the claim in episode 212 of the “Facts Versus Feelings” podcast. After grouping Samsung, SK Hynix, Micron and TSMC, he said: “each generated more free cash flow in the third quarter than any other listed U.S. company, including Nvidia.”

How does processor spending reach memory suppliers?

Varghese traced the cash flow through a processor’s component list. When technology companies buy processing units, those products include memory chips from Micron, Samsung and SK Hynix, and Nvidia applies its own margin to the finished unit. The same data-center order can therefore generate cash for several suppliers, not only the processor vendor.

That arrangement helps explain the ranking. Nvidia can remain the most visible seller of artificial intelligence (AI) processors, while component makers and foundries collect on the same buildout. Varghese characterized the result as capital accumulating throughout the AI and semiconductor supply chain rather than at one company.

Where is hyperscaler spending going?

Varghese attributed the suppliers’ high FCF to technology companies expanding data centers at scale. He put hyperscaler FCF at negative $40 billion currently and said it should remain negative through 2027. His description was blunt: “what’s happening is the buyer’s cash flow is going straight to the sellers.”

The spending figures behind that transfer have also risen:

• Major hyperscaler capex estimates for 2027 increased to $1.15 trillion, 94% above initial estimates.
• A broader group of six hyperscalers was expected to spend $1.4 trillion in 2027, almost 4% of gross domestic product (GDP).

That combination lets chip suppliers generate high FCF while their customers run cash deficits. Processor purchases, memory and foundry output move spending from hyperscaler budgets to the companies supplying the hardware.

Are chipmakers retaining or reinvesting the cash?

The memory manufacturers are directing part of the proceeds back into infrastructure. Varghese said their capex has doubled over the past year, even as their FCF reached the levels described in the podcast.

His forward estimate covers a broader group. He expects aggregate FCF from Nvidia, Micron, Broadcom and Applied Materials to climb to $150 billion to $200 billion by the end of 2027. The projection extends the cash-flow comparison through the same 2027 period covered by the hyperscaler spending estimates.

What does this change for stock investors?

It changes the focus from accelerator shipments to company-level cash generation, but it does not answer the stock-performance question. The analysis provides no share-price moves, total returns or valuation multiples. Investors therefore cannot treat the FCF ranking as evidence that Samsung, SK Hynix, Micron or TSMC shares were the period’s best performers.

The concrete signal is the direction of capital. Hyperscalers are running negative $40 billion in FCF while set to spend $1.4 trillion in 2027; memory suppliers are doubling capex, and Nvidia, Micron, Broadcom and Applied Materials are projected to produce $150 billion to $200 billion in aggregate FCF by year-end.

For chip investors, the key change is simpler: the cash sits with sellers. Hyperscaler cash positions remain under pressure through 2027.

Benzinga disclosed that the original analysis was partially produced with AI tools and reviewed by its editors. It also said it does not provide investment advice.