As widely noted and discussed, the four largest companies in the S & P 500 have indicated that they will spend between 25% and 50% of revenue on AI capital expenditures. Such spending should cause many to ask some simplistic questions. Is this possible? Will the products be available? What will be the return of investment? What about energy sources?
Even if all the questions are answered favorably and that spending will prove to be wildly profitable and transformative, one really can’t maintain that it will be so “for everyone.”
In other words, at this level of capital expenditure, there will be winners and losers. Who remembers AOL, Ask Jeeves, Lucent or Northern Telecom?
The worst-case scenario is that they all end up losing from massive over investment. However, it does not appear to be any scenario where the inverse can be true where everyone ends up winning.
The hyper-scalers and computing power providers are competing with one another, and the odds are that it will not work out for all.
Yesterday’s story about OpenAI in significant competition with GOOG may be worth watching in an attempt to understand that there is not one monolithic AI story, that there are different companies competing against each other.
Changing topics, yesterday was another quiet day. The S & P was little changed; Bitcoin halted its rebound and Treasuries fell. There was little change in the odds of a 0.25% reduction at next week’s FOMC meeting.
What will happen today?
Last night the foreign markets were up. London was up 0.10%, Paris up 0.33% and Frankfurt up 0.65%. China was up 0.70%, Japan down 1.05% and Hang Seng up 0.58%.
Futures are flat. The 10-year is off 4/32 to yield 4.11%.
