Nvidia<\/a>-backed CoreWeave – up around 50% – and Nebius – up over 200%. Known as neocloud providers, the companies rent computing power to \u2060customers, ranging from AI labs to businesses, and have capitalised on elevated spot pricing for scarce AI capacity. <\/p>\nJanus Henderson’s Bankers Investment Trust portfolio manager Richard Clode, however, said that over time hyperscalers were likely to benefit from their investments. <\/p>\n
“By later next year into 2028, we think you’re going to start seeing these companies growing profits and cash flow faster than the incremental capex growth,” \u200bhe \u200bsaid. <\/p>\n
Clode said Amazon was one of his fund’s biggest overweight positions. <\/p>\n
“Today’s capex is tomorrow’s sales,” he said. <\/p>\n
A \u200bReuters analysis estimates hyperscalers will generate about $340 billion more in annual \u200coperating cash flow in 2027 than in 2025, while capex is expected to rise by roughly $534 billion. <\/p>\n
NOT AS SIMPLE AS CHIPMAKERS VERSUS CLOUD PROVIDERS <\/p>\n
John Lamb, equity investment director at Capital Group, which manages about $3.6 trillion in assets, said investors should view AI as an expanding ecosystem. <\/p>\n
“It’s not about whether chips are better investments than hyperscalers. It’s about having both in your portfolio,” he said, noting that data centres typically take 12 to 18 months to move from construction to producing revenue. <\/p>\n
“We’re just starting to see from the latest quarterly earnings this inflection point.” <\/p>\n
PICK YOUR WINNERS <\/p>\n
Clode says those companies that control both computing capacity and the layers that help customers deploy AI efficiently across different models, optimising cost \u200cand performance, will gain a competitive edge. <\/p>\n
He says companies such as Amazon, Microsoft and Google have \u200bmore lasting advantages than neocloud providers because of their scale and customer relationships. <\/p>\n
Hyperscalers’ valuations have compressed this \u200byear and remain below their post-pandemic peaks. Microsoft trades at about the highest \u200bmultiple of 24.6 times forward earnings and Meta at the lowest of 17.6. <\/p>\n
BCA Research Chief U.S. Equity Strategist Noah Weisenberger said neocloud providers \u200ccould be vulnerable if new computing capacity comes online and pricing \u200bnormalises, given their heavier reliance on debt and \u200bhigh pricing. <\/p>\n
He said the hyperscalers’ shift to a more capital-intensive business model could restrain valuations even if earnings remain strong. Yet, he recommends a long-hyperscalers, short-neoclouds trade. <\/p>\n
FEWER FUTURE WINNERS THAN PLAYERS TODAY <\/p>\n
Even for the winners, there are challenges. Swiss wealth manager LGF+ZEST CIO Alberto Conca estimates AI monetisation needs a fivefold to thirteenfold \u200bincrease to justify current spending plans. <\/p>\n
Barbetta expects competition to narrow \u200cthe field of AI winners as the market matures, with those companies with the broadest technology portfolios, deepest customer relationships and greatest control over \u200btheir own infrastructure likely to pull ahead of more specialised rivals. <\/p>\n
“There are absolutely going to be fewer winners in the future than there likely \u200bare players today,” he said. <\/p>\n
(Reporting by Danilo Masoni; Editing by Amanda Cooper and Barbara Lewis) <\/p>\n","protected":false},"excerpt":{"rendered":"By Danilo Masoni MILAN, Aug 17 (Reuters) – The rally in AI-linked stocks that marked the latest earnings…\n","protected":false},"author":2,"featured_media":641513,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[261],"tags":[291,1463,289,290,1056,271364,207654,6930,18,19,17,305,45217,82],"class_list":["post-641512","post","type-post","status-publish","format-standard","has-post-thumbnail","category-artificial-intelligence","tag-ai","tag-amazon","tag-artificial-intelligence","tag-artificialintelligence","tag-big-tech","tag-brian-barbetta","tag-capacity-constraints","tag-companies","tag-eire","tag-ie","tag-ireland","tag-microsoft","tag-spending-spree","tag-technology"],"share_on_mastodon":{"url":"","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/641512","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/comments?post=641512"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/641512\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media\/641513"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media?parent=641512"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/categories?post=641512"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/tags?post=641512"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}