AI Capex Splits Valuations of Griffin's Top Tech Holdings
Ken Griffin’s Citadel holds Microsoft, Amazon and Apple, but soaring AI infrastructure costs are driving wildly different valuations and cash flow profiles across the three mega-caps.
Ken Griffin’s Citadel Advisors counts Microsoft, Amazon, and Apple among its largest equity positions, yet the market is treating the trio's massive artificial intelligence investments with starkly different valuations. All three are hyperscaler-adjacent and posted double-digit revenue growth last quarter, but their share prices reflect a widening divergence in how investors price AI capital expenditure.
Microsoft presents the clearest value case. Despite Azure growing 40% and its AI business hitting a $37 billion annual run rate up 123% year over year, shares have fallen 17.83% year to date to $399.11. This drawdown has compressed the forward price-to-earnings ratio to 20, a discount that 54 of 57 tracked analysts view as a buying opportunity given a consensus target of $559.86.
The software giant is absorbing heavy spending. Capital expenditure surged 84% to $30.88 billion in a single quarter, pressuring free cash flow. However, a 45.62% operating margin and 53.9 times interest coverage indicate Microsoft's core business can comfortably fund the AI infrastructure buildout.
Amazon faces a tougher financial test. While AWS notched its fastest growth in 15 quarters at 28%, the cloud giant guided to roughly $200 billion in capital expenditure for 2026. Trailing free cash flow collapsed 95% to just $1.2 billion, pushing the price-to-free-cash-flow ratio above 356.
Amazon’s first-quarter earnings appeared robust on the surface, with EPS of $2.78 crushing estimates of $1.73. However, that beat was inflated by a $16.8 billion pre-tax mark from its Anthropic investment, obscuring the underlying cash burn. The stock is up 10.46% year to date, effectively matching the S&P 500's 10.69% gain.
Apple sits at the cautious end of the spectrum. The iPhone maker has outpaced the broader market over the past year, but that momentum has pushed the stock above analyst consensus targets. At a trailing P/E of 38, Apple commands a premium that investors are pricing without the immediate AI revenue growth seen at its peers.
For market professionals, this divergence highlights a critical inflection point in the AI capex cycle. Investors are no longer rewarding AI spending blindly; they are penalizing balance sheets where capital deployment severely degrades cash generation, while accumulating stocks like Microsoft where earnings multiples offer a margin of safety.
