AI Capex Boom Approaching Endgame

The artificial intelligence sector is experiencing a period of massive capital expenditure, reminiscent of the late 1990s internet infrastructure build-out. Hyperscalers like Amazon, Google, Meta, and Microsoft are collectively spending record amounts on data centres and specialised AI chips, with projections reaching trillions of dollars in the coming years.

However, concerns are rising about whether this investment will translate into sufficient returns. Revenue from AI products is lagging behind infrastructure costs, leading to questions about the long-term viability of the current spending levels. Some analysts suggest that AI firms will need trillions in annual revenue by 2030 to justify the capital expenditure, a figure that may be difficult to achieve. The heavy reliance on debt to fuel this growth also raises concerns about potential risks to the global financial system.

Despite the risks, some analysts believe that AI has moved from hype to a structural global investment trend. They forecast massive growth in AI infrastructure spending, driven by hyperscalers and other players, with significant opportunities for companies involved in AI infrastructure.