CAPEX

aka0007

Cost per MW might be about $50 Million on earth to build. 15 GW (projected for 2026) costs about $750 Billion. SpaceX projects their satellites will weigh 1 ton per 70kW of AI compute. A Starship that can launch 100 tons in a reusable config can therefore launch 7MW of compute. To launch 15 GW of compute that would be 2,143 launches. Assuming a Starship costs $100M to build plus $5M for reused launches and each one lasts 5 launches that is a cost for 5 launches of about $125M. The cost of 2,143 launches would be about $54 Billion. A relatively trivial part of the $750 Billion it cost to build this on earth. SpaceX could arguably charge $150B+ to launch that making a $100B profit launch. AI datacenters in Space do not require the same infrastructure on earth so there are significant savings to offset costs further. In any case, AI CAPEX will likely continue to increase and SpaceX will be well positioned to price their launches plenty high to make some big profits. Lot of assumptions and things SpaceX needs to accomplish to prove this out hence the risk involved here in investing. Also, I never recommended investing just noted the type of profit potential we can be looking at here. FYI, I checked my answer above with Google Gemini and it feels the weight assumptions and volumetric assumptions for launch might be off a bit... so take your napkin and double the launch costs and assume they charge $200B instead for this.... it seems to me there is room all around for this to work out. Myself I did not invest in the IPO for SpaceX and I am not advising anyone one way or the other. I just find the topic fascinating. It is really hard to place a value on a business that is still developing something and failure or taking much longer than expected (as is often the case with Elon Musk) can cause the share price to decline. My current most interesting, for me, investment is CNK, a boring movie-theater company, not because of any fancy AI stuff but because fundamentally I am confident on it going up and up in value and I think I can make a nice amount of money on that this year.

NiknameOne

All the big tech companies are burning trough TRILLIONS and it is unclear if they will have a positive returns on these investments. The only one keeping CAPEX reasonable is Apple.

podunkhick

Isn’t it only red because of the Google and Oracle dilution fears spreading to msft. The CAPEX was already known and it pumped 20% to 470 before dipping back down.

KittyLover-7

Trap, market doesn’t like its CAPEX which is holding it back

aka0007

Obviously I could be wrong and there is some factor I am missing.... but everything I have researched into is telling me that the RAM for AI is not something anyone can come in and compete with and with Vera Rubin (this year) and Feynmann (2028/2029) the demand for more and faster RAM is only increasing. Meaning the shortages are getting worse before they get better. FYI... the last 5 quarters (I looked at these figures) Micron has been capturing a larger share of the increase in AI CAPEX spending then NVIDIA. Like I said there are a million what-ifs but I think the case for MU to increase is very strong.

KittyLover-7

Space x will have a higher valuation than meta btw That’s how stupid this is Take AI CAPEX out the equation, meta shits money out it’s ass from ad revenue on high as fuck margins

KittyLover-7

Space x will have a higher valuation than meta btw That’s how stupid this is Take CAPEX out the equation, meta shits money out it’s ass from ad revenue

KittyLover-7

This is it. This is the start of the bubble pop. The writings on the wall, inflation creeping up and up, job market trash, billions soon to be trillions in CAPEX to generate ai cat videos. Strait closed and oil still supply choked. Taiwan will be taken by daddy xi Xi soon. Get out whilst you can. This is ber erotica

Rasta_Rising

Thanks. I have no doubt that it would be more efficient/less burden. But I don’t think it would make the C-suite think and act significantly more long-term, e.g. breakeven payback on CAPEX.

Brawmethius

oracles CAPEX spend ends up on other companies revenue sheet. they are doing the capex to revenue glitch wrong.

lavaeyeye

Yes AI is a great technology, I also use it quite a bit, that doesn't mean that actual valuation are lunatic. Secondly, even at 50 USD a month they are probably losing money with you. RN a 20$/m subscription gives you around 200$ worth of AI token. When Github copilot released in march of 2026 a 39.99$/m subscription allowed you to use around 1500$ worth of token. I do believe that at this point in time we are paying closer to what it costs, but we are still having pricing that is subsidized. And yes, some people will see the premium to use the technology at the true cost, there is no denying that. But I don't believe the demand is there for 600-800B in annual CAPEX and massive data center buildout.

KittyLover-7

**Fully autonomous AI drones have killed human soldiers for the first time** **Oh brother, to hell with this ai CAPEX**

Superb_Barnacle_4893

This hyper-bear take is such an entertaining extreme take, let’s break this down rationally. Search still dominates global market share by a massive margin, their AI stack Gemini is scaling into enterprise cloud subscriptions steadily, YouTube ad revenue remains resilient through ad cycles, Android owns most global mobile OS market. Massive cash pile + consistent positive FCF is not a weakness—it’s dry powder for AI CAPEX and share buybacks. A single month’s pullback never rewrites a company’s core moat. I ran a full DCF valuation for GOOG last week mapping AI revenue ramp-ups. DM me if you want to compare model assumptions.

gigio123456789

What’s the accounting trick here though. Does this stuff show up as some kinda earnings in both books? AMD have paper earnings because they just invested in some asset (the startup) whose paper valuation goes up. The startup has the CAPEX show up as some kinda paper earnings through some depreciation rules?

LongLonMan

This is my problem with this IPO, while Starlink is incredibly innovative tech, it’ll never really replace ground internet, the infrastructure has been built out and internet itself is a commodity service. Starlink works great for customers on the fringes, but it limits their opportunity in market and is highly expensive to maintain. Most of the valuation is from their AI datacenter division which is still in full CAPEX mode, at this point it’s not a real business.

lavaeyeye

Because none of the CAPEX is sustainable. Data centers are plagued by delay, probably that a majority of microsoft ai chips are sitting in warehouses, not a single company can give a ROI to their AI spendings. SPV financing scheme needs stellar liquidity from private credit, and that liquidity has taken a hit in the last few months. Company are stopping tokenmaxxing as costs were way higher than expected. Core Nvda buyers like coreweave are going through a bond crisis with rates around 12% and 35B in expected Capex this year, which in my opinion they have no way to find the cash. Us power grid is not following expected data center buildout. Chinese competition has closen the gap and is only 4-6 month behind leading US models for around 1/20th of the cost. Investors are worried that Space x ipo might be weaker than expected setting a bad precedent for future AI IPO, and these ipo needs to be stellar otherwise OpenAI and Anthropic will have difficulty to respect spending commitment. Credit default swaps of major hyperscaler have seen an increase in the last few month, this will increase the cost of borrowing of these company. I can't seem to find the rational on why going long other than hyperscalers can theoretically sustain CAPEX expenditure if they wreck their financials. Disclaimer : I have NVDA puts march and june 120 SOXX PUTS 300 march

Open_Pollution_8038

I don’t think you understand financial statements because CAPEX is above the line from earnings so when I keep saying they profit about 40% that includes all of their expenses. And their profits are growing by about 30% each year lol.

SmartPatientInvestor

Jobs report beat expectations, which means lower likelihood of rate cuts, which means more expensive money for CAPEX-heavy tech stocks and lower PV of future cash flows. Stocks go down

Asleep_Emphasis69

I would take some time to seriously research the financials of big tech. I would start with earnings videos on YT. The fact is these two companies no longer fortress balance sheets due to CAPEX, which means 0 FCF for the next few years most likely. The boomers that are retiring can not tolerate situations where META/MSFT pause buybacks and stop compounding on FCF so they fucking sell dude. They go into dividends with constant cash flows and ride off into the sunset. But you and I are not retiring. We invest through the Capex cycle my man. Our risk is rewarded with future cash flows after the cycle is over in 3,5,10 years….if you didn’t understand any of this then you definitely need to understand the financials first before investing

Immediate_Code_9272

It makes no sense, these companies are trading at huge multiples on future earnings and everyone is talking about the end of cyclical semiconductor manufacturing. If the market thinks software / hyperscalars are not going to get good ROI on their AI CAPEX after another 1-2 years, then semis are still cyclical...

MajesticBread9147

Here's the thing. Cloud computing can either be an industry that requires large scale, a good amount of negotiating power both with suppliers and customers, and hiring a lot of very smart people... Or it can be an industry anybody can get into with a few hundred million dollars worth of lines of credit. The former means it's going to be a high margin business with high barriers of entry. The latter means that this will just be a commodity business in which case they will have huge CAPEX costs and low margins. The major cloud providers are here to stay, and Coreweave and Nebuis' path to profitability is well, nebulous, but I seriously doubt that "YouTube for rejects" is going to be able to find a niche any more than that shoe company can.

A-Generic-Canadian

Starlink profitability isn't dubious, even with satellite refresh. Their cost per satellite (launched) is $1.4M with a \~5% failure rate on launch, and lasts 10 years. To maintain their 10,000 constellation is \~$15B in CAPEX per 5-years. Even with their diluted monthly ARPU of $66, at 10M customers, holding it flat they generate $660M monthly, or $7.8B / year, as a floor, though their S-1 reports $11.4B. That means that it takes 1 - 2 years of their 5-year lifespan to cover the cost of refresh. So in our hypothetical to maintain the current constellation they can generate $39B - $57B over 5 years. Their CAPEX cost over that same period is $15B. We can't find their OPEX, but there is no way it eats up that entire $14B - $42B. Their service also doesn't need to provide service where populations are concentrated, there are enough customers in remote communities that want broadband connectivity where the cost of building equivalent service is cost prohibitive, to keep the constellation and its competitors flush with cash. Edit: Full disclaimer, SpaceX IPO is overpriced, nothing above changes that. Just responding to the point that Starlink is a legitimately good and viable business, it's just weighed down the turds of xAI and Twitter.

SoCallMeDeaconBlues1

For anyone who doesn't know, SK group is a HUGE conglomerate, just like Samsung is. Fun fact, SK also operates the largest number of gas stations in Korea. 66% of KOSPI is comprised of just those two companies. The partnership goes well beyond just SK telecom. It also extends into SK Hynix, which is the HBM technology global leader. A major portion of these nVidia AI products are using HBM. HBM DRAM differs from regular DRAM in some very important ways. There's really only 3 players: Samsung, SK, and Micron, and none of them can keep up with the demand for the stuff. Look for SK's next gen HBM to start hitting the streets within the next couple quarters. SK Hynix is in ramp for it now and is spending CAPEX for this specifically; SK's NextGen HBM utilizes some new methods to deal with thermal loads.

aka0007

So what is all the AI CAPEX that is increasing going towards? Oh, right... RAM. No worries, in 2-3 years when Feynmann comes out and optical interconnects become critical AVGO and MRVL will likely benefit from that. Right now what they sell is not as critical a supply constraint.

aka0007

The RAM MU makes for AI (HBM) is a more critical product than the GPUs TSMC makes for NVIDIA as memory constrains the number of GPUs that can be made. With HBM4 and in 2-3 years HBM5 this is only getting worse. There is a reason why for the last year or so an increasing share of the growth in AI CAPEX has been going to memory companies and not NVIDIA. Yes, I did the work here. MU is going to see its profitability increase significantly this year and continuing for several years. MU to $1,600 when it reports earnings.

Unfair_Adeptness_838

Those who advertise on insta use theirs AI for sure. Problem is in huge CAPEX spending which spooks investors and those dillution rumors are just cherry on top. Short term puts are free money

aka0007

In my opinion... I was working through the logic and math last night of space based data centers and this is something I think will not be well understood for a few years yet. Basically... my understanding is the launch mass of a 100MW datacenter would be about 400 tons, with the major component being the weight of the radiators to cool the data centers. The v3 Starship I believe is supposed to be able to launch about 100 tons of mass to space in a reusable configuration, so perhaps 4 launches. A reusable Starship incremental launch cost is trivial (if no maintenance is needed, just fuel, perhaps $3 million) making launching this mass very feasible. To be 100% clear, this assumes the Starship being reusable and being able to launch 100 tons of mass works out. If it does not... fyi, the future versions of the Starship are aiming to launch significantly more mass, like 200 tons. Data centers in space can be powered relatively easily by solar panels which are estimated 4-5x more efficient then on earth. Further you should be able to avoid need for batteries in space as you can be in orbits that always get sun. You would need to consider radiation hardening and how to you assemble this in space. To be clear this is not an easy task but cost-wise it should make sense and you overcome the power constraints and other constraints you face on earth. In 2026 about 15 GW of datacenters are expected to come online... that is equivalent to about 150x 100MW data centers. Each one has a shell cost of about $1-$3 Billion, so figure about $300 billion shell cost before GPUs are installed. AI CAPEX spending by the major players is about $1 Trillion for 2026 and this number is expected to continue rising (might soon slow down the rate of increase but it is increasing). Basically... in a few years we can perhaps see SpaceX being contracted to launch 15 GW+ of AI datacenters to space. If the constraints on earth are increasing and driving costs up then SpaceX can easily being seeing demand for launches that would enable it to bill, say $1 Billion+ for every 100 MW it launches to space. At 15 GW that comes to $150 Billion. Assuming each Starship is good for 4 launches at a total cost of $150M for 4 launches that is $850 Million profit per 100 MW launched which times 150 (15 GW) is $127.5 Billion in profit. Further, if space based data centers work out then the largest launch customer for them will be SpaceX itself... basically they make a ton of money launching for others and that covers the cost of their own AI data centers. Not unlike how Starlink is SpaceX's current largest launch customer. In any case the implications of this is SpaceX may be the dominant AI infrastructure company.... and they have Starlink already to enable communication with their data centers which can reside in their ideal orbits. Bottom line... if Starship as a reusable launch vehicle proves itself and space based AI data centers works out then SpaceX is set to make a windfall that will easily justify its current valuation and exceed it.

aka0007

At least into 2031 if not longer. Got to figure minimally 2-3 years from when HBM5 comes out (with Feynmann) before demand can ease up. With the need to load larger models into memory for inference it is very possible that demand for the latest memory will continue even longer. FYI, if you compare the revenues of MU and NVDA the past year or so it is obvious that of each additional dollar spent on AI CAPEX the memory companies are capturing a larger and larger share of that and NVDA is getting a smaller share of it.

SoCallMeDeaconBlues1

My opinion is, IDGAF if it's a bubble or not. If you were paying any attention at all in 2023 you could've seen this coming. If bubble, it hasn't burst yet because we're not at the top yet. Continuing to invest in it because big money still sees profit to be made. More buyers than sellers, it's really that simple. Yes. CAPEX spend won't go away. Not any time soon, anyway. Your last question is naive to the entire premise of tech.

daynighttrade

Particularly for SpaceX, we are satellites need to be placed every 3 to 5 years, you just can't ignore the capex cost. EBITDA it's fine for companies with one time capex cost, but not for companies with recurring CAPEX. For SpaceX, there capex cost are huge. When included their earnings become negative

SiliconNexus_Quant

March 2020 was a global economic shutdown. Today is just algos throwing a tantrum over macro noise. ​The physical supply chain (especially upstream equipment and HBM) remains structurally tight. TSMC packaging load and memory CAPEX didn't magically drop 10% overnight. ​Selling a structural supercycle because of a one-day sentiment flush is exactly how retail transfers wealth to Wall Street. Thanks for the discount.

AccountOfMyAncestors

The worst thing that could happen right now is for MSFT and AMZN to FOMO in on dilution too, just because Google and Meta announced so. Would amount to hundreds of billions of dilution for AI, all coming in the same 1-2 quarters as the 3 mega-cap AI IPO raises. Of all things, THAT would probably be the crescendo that triggers the crash. The market needs to punish the fuck out of Zuck for considering this, dump his shit stock under $500 asap to scare MSFT and AMZN away from this. Don't be retarded Satya and Andy, DO NOT ANNOUNCE DILUTION FOR AI CAPEX.

Sea-Supermarket5257

Nope. Grossly overvalued AI sector needed rates to go down for CAPEX borrowing to continue parabolic ascent. 830am NFP print dashed hopes for rate drop anytime soon.

booobReviewer

Semiconductors are in a weird spot — the AI buildout CAPEX is real and growing, but the market is demanding perfection on execution. Broadcom's drop wasn't about bad results, it was about the stock running up 40% YTD and the bar getting impossibly high. The key question is whether the selloff is driven by fundamentals or positioning. If Broadcom, Marvell, and Nvidia are all dropping on in-line results, that's positioning (profit-taking, option unwinding) not demand destruction. That tends to be buyable on a 6-12 month view. If you start seeing companies pre-announce weaker AI chip orders, that's different. I'd wait for the next earnings cycle to confirm demand is still there before going heavy. In the meantime, SOXX at its 50-day moving average is a reasonable entry for a starter position if you're bullish on the long-term AI thesis.

SoftCheeseBurger

Lol you think this is bad? Wait until the CAPEX from mag 7 slow and the RAM shortage comes to and end.

aka0007

NVIDIA is not where the major growth in AI is. Every quarter their share of the growth in AI CAPEX spend will decline as other things with critical supply constraints (e.g. RAM now and in 2-3 years optical interconnects) will capture a larger share of that growth.

aka0007

The idea of an AI bubble is convoluted. Companies like Google have a fundamental need to continue to invest as much as they can in AI for the foreseeable future. This means spending every dollar they can on Vera Rubin chips and then Feynmann. This is the only way they can significantly increase the number of parameters they can train on and be able to run larger more advanced AI models. The fundamental need here is driven by what these AI investments enable. It enables better search results. It enables self-driving. It enables quicker and better writing of code. It enables for Amazon greater automation of their logistics. End of the day, these companies are in a race to stay ahead. Falling behind is an existential threat to them. So very simply... it means that they will throw every bit of free cash flow they have at AI infrastructure until such time as AI infrastructure is advanced enough that further improvement is only marginal. Vera Rubin comes out this year and will ensure years of demand and when Feynmann comes out in 2028/2029 it will ensure even more demand lasting for several years at least. Beyond that, I don't want to speculate, but I would imagine that as AI becomes more and more useful it will driven ever-increasing demand for inference meaning that the off-switch here is years out. People like to look to trains as an example of a bubble... The difference here is unlike the train where once you built a track and own it you have a long-term monopoly even if you do not build further, with AI you have to continually update everything. You can't sit on your existing data centers as you will find out you are unable to compete with competitors who move to the Vera Rubin chipset and later to the Feynmann platform. So look at the cash flow of the major hyperscalers and realize that as long as they have cash flow to pay for it they will spend more on CAPEX. The limit of spending is where their cash-flow tapers off. These companies are seeing continued increases in their own revenue and profitability year over year which means more money to spend on AI. As to companies like, my current favorite, MU, my own analysis tells me they will likely see $20B+ in net income for the May quarter and that will continue to increase significantly the rest of this year. In short order I expect them to approach $200B in annual income that will persist (and grow) through 2031 at least. Their current market cap sits at $1T, which to me implies they are undervalued. Further AI will drive improvements in efficiency for businesses enabling further scale without increases in labor costs which means more and more money available for spending on AI thereby further propping this up. But is there a bubble? Hard to know. Perhaps AVGO and MRVL are overvalued. But in 2-3 years when Feynmann comes out and optical interconnects are foundational to it, perhaps the demand these companies will face will be massive and drive up their valuations.

Brawmethius

Guys what dont you get. People need to lose their jobs, so we make it cheap to borrow money, so we can build out data centers. Its like econ 101, get rid of core goods and services in favor of non profit generating CAPEX. Like literally day 1. Duhhhhhh

WorkingGuy99percent

Agreed. Been laughing at CNBC analysts yesterday being all “we just saw the top” comments. 2027 CAPEX is going to be more than 2026 CAPEX for the hyperscalers.

aka0007

I looked at their prior quarters... I looked at the Q1 CAPEX expansion for Google. I looked at the quarter ending in April increase in revenue in NVDA... I did research to understand the memory shortage... My conclusion is that MU will likely have around $20B in net income for the quarter when they report in June 2026. People are going to take out their calculators and realize that this is a company that will be making well over $100B a year against a current market cap of $1.14T... NVDA trades at about a 23X PE ratio based on last quarter... if MU was valued like that it would mean the market cap should be $1.84T (i.e. if the income it reports in June is about $20B), which would be a share price of about $1,600. The revenue growth rate by MU is much greater now than NVDA so a higher PE ratio might be warranted.

WorkingGuy99percent

I don't know. All I know is that the hyperscalers have said that their 2027 CAPEX will be more than 2026 CAPEX. It depends what they say in 2027 for the next year. And forward guidance of the hyperscalers spending more money to build out AI would mean there is more money being spent and lots of smaller companies reaping the rewards. And the hyperscalers are saying that they are building out because they can't meet the demand. I don't see this ending in 2027. At some point, the gap between what is needed and what is available will get smaller....I am not sure if anyone has any expectations as to it being closed completely. Once the chips get powerful enough to have full capacity AI locally, than datacenter build out will end. But then all those chips and memory have to go into individual devices (cars, planes, robots, computers, etc.). Do you think technology is done? Have we reached the pinnacle of all that is possible?

aka0007

MU's revenue doubled from 2 quarters ago and their operating income increased pretty much by the amount of revenue. They have simply been raising prices due to off-the-chart demand. Go look at the rate of revenue increase by MU vs NVIDA. Look at SK Hynix as well, the story is the same. It does not compare. The demand-supply mismatch for memory is far greater than for GPUs. Meaning the increase in spending on AI CAPEX will flow more to memory makers than to GPU makers. MU last quarter made $14 Billion net. I think very likely by year end that is at $25B+, which would on a forward annualized basis be $100B+ net income a year. MU has a market cap of $1.2T which I think means that very likely MU compared to NVDA is undervalued and should see a doubling in value. My current investment in MU is not that much but I think to at least buy some shares. Might buy options if the premiums are not too much.

thenamelessone7

The CAPEX will go down when nvidia stops being greedy as fuck and they become satisfied with a 40% margin as opposed to the current 70-75% margin.

KittyLover-7

This gets fun when other mags dilute for ai CAPEX

lavaeyeye

It won't last that long, FCF of hyperscalers is expected to become negative in Q4 2026, unless we see massive increase in profitability in AI in the next few months, Capex will be revised downward, Oracle Credit default swaps are already trading at a premium. As big as hyperscalers are they don't even have near that amount of money to burn on unprofitable CAPEX. IMO market will correct Q4 2026/ Q1 2027

GloomyMembership4197

If SpaceX raises only 75B, why you say that investors need to sell smth else (like MAG7). 75B is peanuts, sometimes in one day random MAG 7 can lose 100B in CAPEX? E.g. Google is 4T Capex, so 75B is what? Like 2% drop? That's it, 2% drop in Google covers whole SpaceX shares that will be sold in public market?

No_Cell6708

Is there a disconnect? Or, does it make perfect sense because the semi producers are actually selling a ton right now and making a shit ton money as AI companies buy everything in sight; meanwhile, GOOG and MSFT are spenders and whether or not they see a return on CAPEX is uncertain?

origami_bluebird

Lol literally yes. You just described the basic mechanism of FINANCE and the velocity of money, how do you think banks operate? If anything, the fact that investment banking and toxic mortgages no longer represent a significant portion of the SP500 compared to today's hyperscaler CAPEX deals are far safer for the economy on a systemic risk level.

frey_to_tilt

I'm more interested on who will give up first and say that "Yeah, we overspent on CAPEX quite bit, we don't see the ROI getting better".

dvdmovie1

The show goes on: *ALPHABET SEES 2027 CAPEX INCREASING 'SIGNIFICANTLY' VS. 2026

dvdmovie1

The problem IMO is that people have taken the narrative wrong. Software stocks were expensive and pretty much often have been for years because people loved the SaaS model. Now that there is some question over what the future of that model looks like, these stocks got re-rated and a lot of them went from very expensive to expensive or in some cases reasonable but until there is clarity they are not likely going back to prior levels. Meanwhile, mega cap tech is throwing billions and billions of dollars at capex - THAT has been the trade for 2-3 years now and this would suggest it's certainly not over: *ALPHABET SEES 2027 CAPEX INCREASING 'SIGNIFICANTLY' VS. 2026 Short software/long AI got overextended and you've seen people pile back into software but after a while earnings have to be good so what names can someone make the absolute best case for? I said months ago, too many people buying stuff like NOW when it's clearly not done enough over the last 5 years to create much discussion about it on here. Nobody was talking about buying CRM/NOW when they were down 50% in 2022, but now because there's a narrative people pile in. If you bought recently, you've done well but for NOW being up 31% in a month it's still down 18% for the year - and funny enough the 5 year return is also about 31%. So yes, buy *some* software companies but don't pile into them like some people did months ago when this started - select a couple that you have an actual thesis for where they can do well going forward because there will absolutely be more AI announcements in the months and years ahead.

Brawmethius

I mean fair analysis, sure people will rage about unsustainability its dumb where dahhh money. But they are ignoring the current cycle the market and hyperscalers have latched on to, they can convert CAPEX spend to their reported revenue. ASC 606 baby. Not going to get into the weeds of that or if pro/against, but it is the mechanism at play. Now imagine you are a comapny, you can raise debt, sepnd CAPEX and book large chunks of that as revenue. what do you do? Well you spend as much CAPEX as you possibly can using other peoples money (in this case equity investors).

WorkingGuy99percent

They also said they expect 2027 CAPEX to be more than 2026’s CAPEX. Let that sink in. Companies that make things (chips, stacks, buildings, HVAC, buildings, things that make buildings, cables, etc) are going to be running up thru next year. These companies that will be selling all that buildout will be printing money 2027 onward as well. Building retiring in 5 years new positions now.

NikosJax7

Αre they raising cash because they believe AI will actually be that profitable? or that they know boomers will buy at even the slightest mention of CAPEX?

wazzur1

There are contracts in place already for AI infrastructure. The hyperscalers (google, meta, msft, etc) are in a prisoner's dilemma where none of them can roll back CAPEX ahead of others. This means the show will go on for at least a year or so as they subsidize basically the entire industry. But we see a lot of reports that ROI on AI just isn't there. Eventually, one of them will have to roll it back, and the entire thing will crash.

Willing-Angle-2203

we'll agree to disagree then. The corporate profits are primarily driven by absurd CAPEX numbers from big tech, which coincidentally are also being counted as revenue for them, thus increasing their valuation... whether or not we like this circular financing, it is happening. until the data centers are all built (which btw, they are not getting done anywhere near the rate that they should), and OpenAI/Anthropic/however are making profits consistently, I don't buy into the argument that corporate profits are ATH. We are seeing a lot of fuckery unfold in front of our eyes. I'm happy to change my mind if the numbers prove me wrong in the future. to add to this is the worst energy crisis of all time with no end in sight. This will have a lot of ramifications everywhere, from supply chains to bond markets. The market is in a frenzy right now and pricing in a quick resolution, but reality is that oil is running out at accelerating rates

SamLeCoyote_Fix_1

Whoever announces a reduction in CAPEX spending will take the lead and recover and the sharp fall in DRAM and other AI infrastructure-related ETFs will follow and be dramatic, especially with rising interest rates coming. Exiting the AI ​​sector is the first option we must heed the warning.

SamLeCoyote_Fix_1

I tell you , SELL GOOG asap. Google announces an $80 billion capital increase to fund its artificial intelligence infrastructure. Welcome to shareholder dilution! This is its first major share sale since its IPO in 2004. Will the world finally understand that AI spending is too high and that the clever memory manufacturers are abusing their dominant positions? Furthermore, many are complaining about the lack of honesty and rigor in current LLMs, to the point that Starbucks reversed course this month on its AI agents after discovering too many errors in their inventories. Enough is enough! We won't pay for this. Nvidia cards quickly become obsolete, data center electricity consumption is enormous, manufacturers are inflating their prices, and air conditioning installers are valued like high-tech industries, it's overheating. This explosion in AI infrastructure spending will cause confidence to plummet. The first to announce a reduction in CAPEX will be the winner.

Spiritual-Sir6854

They haven’t had the pump they deserve. Or maybe I should say that are much more modest given their allocated CAPEX spend. Their CEO is extremely cautious with guidance - if he were to speak and hype the company it could 2x. There is also a lot more to Broadcom than just their AI sector of the business - there is the AI play and diversification built in (although yes all tech)

Frozen_Shades

Don't look, you'll be terrified >!👻CAPEX👻 Boo!<

thedudman69

It only feels high to people because of the crazy V-Shaped recovery from the Iran sell off. It recovered so quickly. But looking at the chart, take away the dips and it just looks like a normal up-trend. The earnings are there, the only threat is a pull back on CAPEX by the big companies.

thedudman69

The only risk factor is a lot of those earning are from CAPEX. With that being said I’m really long on MU

Dev_Im

"If you browse the Reddit forums." That's your mistake. You shouldn't rely entirely on what this or the other Redditor says. Read real articles, reports, numbers. Then you'll see it clearer.  This is my POV: This isn't like the dot.com. bubble. Hyperscalers started this with their massive CAPEX. But right now there's a whole ecosystem behind it, touching so many industries and companies... and it's scaling each new year, and benefits too, spending isn't stopping. Demand is higher than supply. If you stop spending, you'll just be left behind. That's why everyone is being pulled in.  Sure, there's a lot of bullshit or AI wrappers or silly apps, pages, etc. trying to ride the wave, you can see market pullbacks too, but that doesn't change the long-term thesis.

Immediate_Code_9272

its not looking good, most likely CAPEX fears will now resurface but MSFT might benefit from some rotation from GOOG as it is not even funding CAPEX with debt let alone equity

KittyLover-7

Multi trillion dollar company diluting to pay for AI CAPEX is pathetic

Ciabattabingo

They are going door-to-door to raise funds to pay their taxes. So, diluting the value of existing shares in an effort to retain more for CAPEX. If I've put that together correctly, then the expected future earnings per share should drop.

Kinu4U

Bullish signal. It means they don't plan to stop CAPEX and this will keep going. META, AMAZON and MICROSOFT will FOLLOW with dilutions

sitbar

Not really, I thought the whole thesis why the AI CAPEX isn't as bad is because the hyperscalers were funding it with their current free cashflow, not debit. This is bearish I think

KittyLover-7

Googl diluted? The ai CAPEX cannot be worth this brother

Brawmethius

I mean if AI ends up being worth it than raising CAPEX to pursue is share holder value. The 12 month pivot on what cash is best used for is whats interesting. About 12 months ago, googles management thought it was better to use their cash to buy shares back. Now they think the cash is better spent elsewhere.

GreatTea3415

The most expensive GPUs are expected to break in 2-3 years of data center workload.  So the CAPEX for these companies will remain pretty high for the foreseeable future. It’s definitely not the one time investment people seem to think it is. 

jackedup2018

Run a DCF to atleast figure out what the market has priced in. Make a decision on whether or not those figures are reasonable or not. Ask Gemini or model of your choice to give you a rough draft, check the math via historical income statement. Think about what big projects MU has going on in terms of CAPEX. You should be well on your way to reaching your own valuation.

SetRestart

That’s exactly my point... you’re looking at the prototype phase and something that isn't even real AI and judging the finished product. Nobody is denying the current efficiency gap or that a lot of people are just using free LLMs for basic tasks. But the massive CAPEX happening right now isn't just to build better article summarizers, it’s laying the infrastructure for physical automation, smart grids, and localized compute that will completely change industrial efficiency. Every major technological shift looks like an expensive, inefficient toy right before it scales. The short term market might panic and correct, but the long term trajectory toward robotics and massive renewable energy demand isn't changing any time soon.

Select-Factor1567

The next play in my opinion is SASS that are essential to AI infrastructure: Datadog, Snow, Oklo have all seen attention but may be in the early stages Whether they are true bottlenecks remains to be seen. For example, SNOW may just be a momentum play that is purely cyclical as many hyperscalers share its moat. Demand is red hot right now. But if you want something cheap, pre re-rating narrative I would say $TRMB, $U, or $HXGBY (unfortunately Hexagon AB is mostly listed in the us as a low volume ADR). I have an extensive thesis for each. Tell me if you’re interested but my personal favorite is $TRMB. Mostly seen as a cyclical industrial hardware stock now. But has been transitioning to SASS. The CAPEX of AI is currently in its mind phase, we are building the brain. We need compute, storage, energy. The next step is the physical world. Physical AI deployment is next. That is the next trillion dollar opportunity. $TSLA is a clear potential winner but my view is what is next $MU or $DDOG.

mfwl

They're the ones doing the pumping. That CAPEX has to come from someone.

WatchYourAss

CAPEX

Open_Pollution_8038

30% revenue growth 14% earnings growth despite massive CAPEX Expanded margins, new revenue streams and a huge cost savings effort underway To cap it off this thing has a P/E of 22 lol. It’s an easy buy. It stands to benefit so much from the AI revolution.

Life-is-beautiful-

If you are assuming that Google, Microsoft, Amazon are NOT making money TODAY, you are completely missing it. All their CAPEX ends up in the cloud and their cloud revenues are surging. They are running it to the limits and are constrained at this point. But predicting when it might slow down and staying in the sidelines, you are only ballooning up the opportunity cost. Will it slow down? Yes. When? Let's ask Gemini or ChatGPT. Not saying this should be the only play. Allocate a portion of your portfolio and ride it, while safely diversifying with passive investments too.

InquisitorCOC

WS is only expecting CAPEX growth in the low teens for 2027 and 2028, so a dramatic slowdown is already being priced in In fact, what's happened this year so far has completely blown out their expectations from October 2025, when those circular deals were first announced The Big 4's (Amazon, Google, Microsoft, Meta) revenue and OCF growths will be the key. If they keep accelerating like in the past few quarters, then upward revision to their Capex will continue. In Q1 2026, the Big 4 grew their revenue by 19% and their OCF by 32%. Another important clue is how companies that have embraced AI will perform in the coming quarters vs AI sceptics

kokkatc

Is it sustainable? Of course not. Spending will eventually slow, the market will eventually pull back in the form of a correction. Will we have periods like this over the next 2-5/yrs, possibly, but who knows. The AI infrastructure build out we're currently in is the largest capex cycle in history, so your guess is as good as mine... but as long as companies continue to show profit, CAPEX spending will continue.

reddituserxxxxxxx7

What people need to understand is that the entire stock market is COMPLETELY - I MEAN COMPLETELY - OVER FUCKING VALUED. There is a reason Warren Buffet is holding more cash than ever. If AI doesn’t start justifying profits YESTERDAY - this whole fucking thing is crashing like we have never seen before. If you’re young, my god, it’s the best thing that could happen to you. I hope yall got a lot of dry powder because if Anthropic and OpenAI go public and we see their actual revenues vs profit - this whole thing goes POP! We are being propped up by LLMs for christ sake. Not a matter of if but when. Again, if you’re young, what a buying opportunity. The best thing a young person could hope for is this thing to crash because right now you are buying at absolute INSANE valuations and semiconductors leading the charge. Guess what happens when the CAPEX of these hyperscalers stop? POP. BIG BIG POP. Grab your popcorn.

KittyLover-7

I don’t think Msft and meta baggies are ready to accept the reality they can trade in this range even next year till they can prove the CAPEX roi which ain’t likely

Willing-Angle-2203

super optimistic about the future this year! \- deal is imminent so no inflation \- above will lead us to rate cuts \- historical semis bull run is driven by organic growth and definitely not billions of dollars in CAPEX! \- I'm sure those data centers/AI will be super cheap to run and make 2T in profits very soon! \- OpenAI/SpaceX IPOs definitely won't be a scam, run by super competent folks! I might just invest in cruise ship companies from all the vacations people will enjoy

thenamelessone7

Lol, the guidance on earning calls of the semiconductor companies is the biggest gaslighting of the century. Who the fuck is going to finance infinitely scaling CAPEX for datacenter build outs? Not even the energy grid can accommodate them anymore. The projected revenue of data centre customers like openai, anthropic, Xai, meta is divorced from reality. The global economy cannot produce the amounts that these stupid projections / guidances command.

thenamelessone7

None of these semiconductor stocks are a good buy now. They are riding the tail end of the AI hype wave. The economy cannot sustain the the current levels of CAPEX on chips for much longer

NotEvil_WSB

I am straight bull for TSLA as they male an actual product with a moat. Fkn RIVIAN making shitty just another EV SUVs in the market. No other company as close. Samsung will take over MU in no time with CAPEX spending potential they have

xxxlefmxxx

A 15 to 20 percent ROIC is necessary to justify heavy hardware CAPEX… applying this logic to current AI investments - if the Mag 7 are commiting $2tn in CAPEX they would need to generate approximately $400bn in FCF/year… at a 20x valuation multiple, this would require an $8tn expansion in market cap just to keep current valuations flat

smucox5

I feel like Meta has opportunity to swing market in a different direction, META might be the first one to cut CAPEX and might end up saying something like AI is more expensive than humans ( like UBER did over the weekend), META might go up and MU and SNDK go down.

Porcupinesolos

Zuckerberg has no strategy but to waste their FCF to the next FAD. AI is an expensive technology with no ROI for most businesses as Uber COO pointed out today. MAG7 NEED TO CUT CAPEX NOW and put these parasitic memory companies in their place that steal their FCF. Fuck ZUCK

aka0007

Forget infinite AI demand, the simply fact is you cannot buy RAM. The shortage for it is insane. I wanted to build some new servers and I cannot find anything remotely reasonable. I need 2x 32GB DDR5 ECC RAM and he current prices on this are like $1,000 each, when it used to cost about $125. For a single B200 chip that might cost about $35,000, you would probably need the equivalent of 6x 32GB (192 GBs) of RAM. At a $1,000 cost per stick that would be $6,000 for RAM, a relatively small part of the overall cost. Obviously the VRAM they use might be built different and the cost is different, but my point is that demand here is sufficient that a company like Micron potentially has room to increase its RAM prices significantly given the current supply-demand imbalance that is expected to last for several years. In terms of Net income... assume their revenue goes from $24B a quarter to about $50B a quarter with the full increase being pure profit and net profit increases about $22B for net income per quarter of about $36B or annualized about $144 Billion. Their market cap sits currently at $1.02 Trillion, which may be we find MU at a PE ratio of 7X in a couple of quarters. Obviously my numbers here used guesses, but when I looked at this last week, my conclusion here was barring some hard stop to AI based CAPEX a company like MU can easily run to $1,400+ when they release their next earnings in June.

melvinzee

Worst one on my Portfolio. Hope he announces some AI breakthrough for all that CAPEX.

0o0o0o0o0o0z

See, I disagree ... for a handful of these companies it's an existential race to own AI. Think of being able to own and patent the internet, thats what these companies are burning so much CAPEX.

absolute_cinema81

The biggest tech firms are wildly profitable but they are also dependent on the broader AI market to keep chugging along. If CAPEX is going to consistently outpace revenue while we are also staring down a rising interest rate environment to combat inflation… that will be brutal on AI companies that are debt-laden.

helloWorldcamelCase

1. CAPEX will stay agressive. It will not shrink, but consolidate to the eventual AI winners who will actually create revenue and henceforth sustainable flywheel. You can play this two ways - guess the winner, or identify winner agnostic stocks. 2. There is definitely some trickle down into software as value play portrayed by 15% surge IGV in about a month or so. I have some position in quality software names but it is more of a rotation hedge, rather than main hitter. Find the companies with strong balance sheet and fundamentals that make them net beneficiaries of AI and you are good.

xxxHAL9000xxx

I believe the typical analyst is blind and dumb here. The reason the CAPEX is so high is because demand for the picks and shovels is outstripping the supply. The big boys are bidding up the prices because they want those picks and shovels now because they know falling behind is worse than spending all cash. some analysts will then say the prices will collapse when output finally catches up. Doubtful. Its never going to fully catch up. This isn’t iron ore. Its not crude petroleum. Its a very very complex supply chain for an industry that cannot ever shrink. The only shrink happening is when one player falls behind and gets left out. That guy shrinks. Try not to be long on that guy.

FatFluffyFish

That's fair. I am still of the opinion that the memory stonks still has significant runway. I think it's more likely hyperscalers drop their CAPEX before China eats into the AI memory margin. Q2 would be interesting to look out for BAG7

Super-Activity-4675

OP, you're right, this is a bubble, and I think you have a good idea what pops it. I'm pretty bearish on the market at a whole, but right now, it's still very much full port calls. Here's what stops it. 1) Someone says enough when it comes to CAPEX. My money is on Microsoft here, who ironically is in the best position to burn money of all the Mag 7. I'm not sure when that happens though. 2) OpenAI/Anthropic can no longer raise funds. Both companies have had multiple massive (many billions) capital raises over the last couple years. They're spending billions faster than earning it. At some point, lenders say no. As it is, they've sucked up all VC funds for the foreseeable future and are now heavily exposed in the private lending markets and are trying to tap the Saudi Wealth Fund. That is A LOT of money spent to still not be profitable. These IPOs will function as yet another cash raise and neither company is profitable, nor have they shown a path to profitability. If one or both of these suddenly can't pay their bills, it's game over. This will likely bankrupt a few companies pretty quick (Oracle, Nebius, Corweave in particular. Blue Owl and Softbank may fail too). 3) OpenAI/Anthropic start charging the true costs for tokens. They're already starting to do this by degrading services and changing the terms of their plans. Right now though, it's a subscription that loses money on every customer because they're subsidizing the costs and trying to get customers hooked. The problem is when customers see the real bill and businesses are forced to cut back on token maxing schemes and determine the real value of their subscriptions. 4) An inflationary storm. I wouldn't underestimate what might happen if the oil shock hits hard. Rates go up, and all that debt that everyone has gets more and more expensive. If I were to hazard a guess, 2027 or maybe 2028. It's coming sooner than people thing as the value for AI really isn't there. I could see it happening this fall depending on how this Iran thing shapes out, but right now, it's still irrational exuberance. Believe it or not, calls.

open-mind-001

Which is minus the CAPEX lol

cotdt

I can see Facebook as the first hyperscaler to pull downward on the CAPEX market. They can't afford any more capex increases and their stock is getting punished for negative free cash flow

ptexpat

EPS is driven by AI CAPEX. But CAPEX is capitalized and doesn't flow through income statement of those who make it (e.g., hyperscalers) today - rather over years. In a way it is a pull forward of earnings through the S&P index. When buying into the roet.today you are buying future earnings. So you need to believe that the hyperscalers in the future will generate major ROI on the CAPEX of today.