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AI Capex Spree Points To Lower Returns On Capital
Get ready for lower returns on capital from the largest, most important companies on the planet.
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“As Snider put it, “The rise of a new technology inherently introduces uncertainty regarding the size and shape of future profit pools, and these uncertainties are unlikely to be resolved in the next 12 months.”
I just read about yet another new, more efficient AI model from DeepSeek. IF the US hyper-scalers choose to adopt some variant of these, datacenters may face an unpleasant headwind of over supply mixed with reduced demand. A lot of “ifs” there, but the overall trajectory is pretty clear, no?
Long the Vendors. Hedge the Spenders.
Feels like the left tail is growing and the right tail is shrinking for the AI developers with an “annual profit run rate over over 1$ trillion”.
In a prior article there was mention of a major Capex write off this year because of the Big Ugly Bill. Does that have any impact here?