CAPEX

MandingoPants

I meant raising 2027 estimates for CAPEX

aka0007

Looking at both Google and Amazon they can continue increasing AI spend and are positioned to use their recently built up reserves if necessary to fund CAPEX. By 2nd half of 2027 it is very possible these companies will be free cash flow positive again.

andytobbles

Counterpoint - 4 companies are spending 1T+/year in CAPEX. Until they pull back CAPEX nobody gives a fuck

andytobbles

Nobody pulled back CAPEX, like 10 companies in hardware carried the stock market from April to July. It’s about to happen again and you better get the fuck in this time or miss out!!

andytobbles

Because nobody is pulling back CAPEX therefore the memory and semi trade is going to send us higher exactly how it did from April>july.

superhappykid

I'm surprised by how determined a certain subset of stock traders seems to be to stay poor. Literally every hyperscaler / AI related earnings has told you CAPEX + Guidance is good for at least a year out. With pretty much good certainty it's 2 years +. We know Wall St Loves profits, we know Wall St looks 18 months out. Fundamentals are basically set for memory and capex related build outs to be a safe bet for the next 6 months and stocks are still down 20-25% From their ATH's. Yet people are unwilling to just full port into this shit and make money. Nah let's try to time the dip on NKE LULU and buy CRM and NOW after a 40% Run.

longtermtulipholder

So True. The current global total addressable market for AI tools (individual and enterprise) is less than $100 billion annually with the US around $60 billion annually. The Big 4 hyperscalers CAPEX spend this year is $700 billion with chips representing around $350 billion this year which will need to be an ongoing expense every 3-5 years. If you add Capex spend from Oracle, OpenAI, TSMC, Nvidia, xAI the total spend this year is closer to $1 trillion.

KittyLover-7

“AGI is here” That’s the result of spending billions/ trillions of CAPEX on? Give my money back

asscrackbanditz

The core function of office suite is still great but the integration of copilot and the desktop vs cloud version is pretty frustrating. I often have to upload the whole file to copilot app instead of using it directly in excel or it will crash. The formatting in browser and in app sometimes can be different for word, its frustrating when you have lots of bullet points. Dont get me started on Outlook. The new outlook is absolutely garbage. I cant even set up the link for zoom meeting and all the attachments are opened in the same window. The fucking worst of them is the search function. I cant find emails that was sent to me in the last few days. Anyway, it was pointed out to me by other redditor, with data, that the enterprise segment are no longer MSFT main profit driver. Cloud and AI are the cash cows, and hence the massive CAPEX opening.

SeisMasUno

HEAR ME OUT YOU MFn REGARDS, THE WHOLE CAPEX IS ABOUT TO TURBOEXPLODE, SEMIS WILL RIP, MEMORY WILL RIP, INFRA WILL RIP. PANIC BUY, CALLS ON EVERYTHING.

vollov2021

Agree with you right here. 0.14% isn't a dividend play other than being able to, technically, call themselves a dividend stock. Imagine if Meta had paid out the invests into the metaverse as dividends instead...that would have made them incredibly attractive with their FCF plus dividends. But, instead of returning value back to investors, they put it into metaverse, AR, and now AI build out when they are laggards. Even MSFT isn't a dividend play. They are still a growth stock. And the reason why they and the other Hyperscalars have risk now is they are sacrificing FCF for building the future. If their business is mature, without other CAPEX investment, I would expect a conversion of FCF into dividends.

EquivalentMobile7883

Look at dell, they might crush it and still not make it, backlog as well as CAPEX has become TOXIC

Remarkable-Tax6464

AT&T isn’t like a nimble tech growth stock that re-invests its profits for capital rocket It runs under a $120b mountain of net debt, from old time terrible corporate acquisitions like DirecTV and Time Warner In AT&T, their primary job is to generate **enough free cash flow to pay down their legacy debt** obligations and defend their dividend yield so retirees don't sell the stock. They have no plan for another CAPEX black hole They’re not ready to ride the AI data center boom

Ordinary_Repeat7637

You kept mentioning that the stock is cheap and has a low valuation. While META could still be a great long-term investment, I would strongly advise against using valuation as the deciding factor. I also want to challenge the idea that Meta Compute will add “tens of billions” to operating cash flow. There is simply no proof of that. Even after the initial CAPEX is spent, Meta Compute will still require significant ongoing cash spending on electricity, cooling, networking, maintenance, repairs, data-center staff, software, security, and eventually GPU and server upgrades or replacements. Revenue does not automatically translate into operating cash flow, especially for an increasingly asset-heavy business.

ShotBandicoot7

I would rather be worried about the CAPEX-AI spend and debt with the circular debt and revenue show than cyber risks.

YogurtclosetOther329

Is that why CAPEX for AI is 100-1000x more? because it costs less?

MandingoPants

AMZN ORCL Mostly AMZN for sure. I think because of anthropic, a lot of these hyperscalers are gonna raise CAPEX again instead of being like "see, we now have made back what we spent, and are keeping it". MMs are gonna use that to bring things down to shake the tree, especially when you look at the 10Y's spike. Pair that with rising volatility and rising hike odds, and you have the perfect scenario for discount city. Next year profits will continue to increase, compute will continue to sell out, and AMZN will finally be rerated as an AI company and will hit $300+. 

ohitsthedeathstar

META is also eliminating the need for contractors to review META posts and is instead using AI models to cut down on payroll costs. There are so many ways META is improving their business with AI, it’s insane. And the best part is META has AI vertical integration with a money printing core business paying for CAPEX. Insane how low the stock is right now.

Wealth_data_dude

Agree, still it's an interesting approach to bear in mind. As we can see the AI CAPEX festivities keep blowing. 

MajikoiA3When

Valuations are justified by current cash flows. Will the future cash flows meet expectations for CAPEX committed? Million dollar question.

Necessary-Shallot976

To your point, they are only starting to realize the return on CAPEX investments. I only follow MSFT but the last earnings call was wild. Ackman is using a 1.19x growth multiple for MSFT valuations, implying that he anticipates doubling his investment in under 4 years. Higher rates might create lower debt issuance but I just don't see that as the concern - the hyperscalers are still demand constrained, a 25-50bps hike isn't stopping the build out. Much bigger concern for them is that they will fall behind each other, they could give a fuck about a 1% cost of capital hike when growing net revenue at 20%.

TimedOutClock

Market's gonna continue to melt because AI CAPEX hasn't eased at all, and Warsh just added a premium to it. Companies better pray there's a breakthrough because this is gonna be a nasty correction if they fall on their face

vermilli21

Why is it so hard for Zuck the cuck just say he will reduce CAPEX and META would literally be at 800

A_Credo

Do yourself a favor and read up on "AI Buildout Reset Wall". 2027 and 2028 companies will be forced to pay the piper. This teaser period will be over. When this happens, the "bubble" will pop. Companies pulled forward about 15 years worth of demand. That is the "bubble". Not that AI is fake or anything, just that they built out too fast and eventually will cool CAPEX spend. When that happens, valuations on stocks and the revenue earned for these companies will plummet.

Aravinda82

This is correct. Saying that all of this AI CAPEX spending is dependent upon the ultimate success of OpenAI or Anthropic is so damn misguided. Whether OpenAI or Anthropic ultimately succeed and are able to get ROI is besides the point. What all of this AI CAPEX spending is doing is building the infrastructure and foundation upon which new companies and industries will emerge from and make use of. Even if OpenAI and Anthropic fail, someone or something else will take their place. AI is happening one way or another. Saying everything is dependent on the success of OpenAi and Anthropic right now is like saying the internet was dependent of the success of AOL.

wafflepiezz

BAG7 gonna tank from nvda earnings, prices of chips increase = higher CAPEX

colts_guy

I would never bet against NVDA in the middle of the largest CAPEX buildout in history.

mykesx

Need to consider the effect of leasing deals that haven’t started so they’re off book. $trillions. This industry needs $1T of CAPEX to generate 10s of $billions in revenue. When you make a widget for $2 and sell it for $1, sell more so you can make it up with volume!

sup

imo the story that needs reinforcing is not the capex spend of the picks and shovels, but the capex spend of the rest of the market pouring trillions of capex into them. NVDA is anchor in this regard. It's the lead beneficiary of CAPEX spend. IMO all it has to do is reinforce the narrative that capex spend is alive and well worth it to reverse the downtrend AI has experienced over the last few months relative to the sp500. It already hinted at it this week and last when it announced 15% price hike on GPUs and the $500b+ funding partnership with 7 wallstreet firms (black rock, goldman, others) the week before. I predict we will see more reinforcement on the demand story and just how profitable these data centers are.

Lunarisation

No question about that. But can the LLM companies (Anthropic, OpenAI and others) pay the hyperscalers 1.65T to give a positive return on AI CAPEX spend?

nxs_sss

Yup implied move is around 4.9% and if similar to the last few quarters you'd just get IV crushed. But CAPEX is big concern this Q. https://preview.redd.it/yrpzl56ojklh1.jpeg?width=1240&format=pjpg&auto=webp&s=b4a9859e0ecf7ff28e6baa4c675b0a74bf3f5589

Sick0h

Felt cute. Might increase CAPEX later.

TherealCarbunc

* "Construction, power, cooling, networking, or acceptance delays." \-They're delivering, they have the nearterm grid energized and secured in Texas and are not effected by the recent audit. NVDA partnership de-risks GPU supply * Further large equity raises or dilutive financing without clear high-ROI deployment. \-Capex models have returned \~ 2 to 5x per $1 spent on GPUs, 7.6B cash on hand current. contracts are coming in with 40-45% GPU prepayments included. the $500B financing NVDA is lining up should be a tailwind to not resort to dilutive financing coming up. This is financing specifically for NVDA DSX architecture, which sweetwater 1's 1.4GW site is a flagship for - Iren is likely to be a direct beneficiary of this. * Weaker-than-expected AI revenue mix, higher costs, or guidance that pushes the ramp later. \-possible if there are delays * Negative industry developments (GPU shortages, hyperscaler spending pauses, competitive losses, regulatory/power issues). \-regulatory should not be a problem per rebuttal to point 1. Demand is outpacing supply, GPU shortages could be an issue. Hyperscaler CAPEX actually is only loosely tied to $IREN - entirely dependent on if they are seeking a hyperscaler contract or continuing to increase their diversified mix they already have contracted for 2.8B. While Hyperscalers a large part of the demand, a lot of compute is still needed outside of their demand: healthcare field, etc * Short-driven volatility or broader market risk-off (especially for high-beta names) \-always a risk "high valuation" is debatable when they're under the MC for current backlog, have 7.6B cash on and have 2x capacity coming online in 2027 to be contracted. I always recommend right sizing a position to your risk for it. With 30% SI in a highly volatile name and one thats gone through a slight recovery after Leopold got liquidated to trade at what's been support to launch off of for \~10 months But outside of the investment thesis: this is shortsqueeze and what matters more is unleveraged longs tying up the float to squeeze the shorts when they can;t find panic/forced sellers

GloomyMembership4197

Burry shorts CAPEX spenders. BABA spends fortune on CAPEX, Burry bullish. Can anyone tell me how is that consistent??? He twists facts to his advantage, I don't trust him

GloomyMembership4197

BABA spends billions on CAPEX, Burry says no word and purchase stock :D Whereas other Hyperscalers spend CAPEX, Burry bearish :D How is that consistent, tell us :D

50shots_

The CAPEX spend actually makes sense if you think about it longer term. They saw what happened to companies that didn't own their infrastructure and got squeezed by cloud providers. Reality Labs is expensive but it's basically an option on the next computing platform. Most of their bets won't pay off but the one that does could be massive. The share buyback complaint is fair though, they should be returning more cash given how profitable the core business still is.

VariationAgreeable29

You guys, good thing Meta is pumping in $140 billion a year into CAPEX to build their own… Something AI??! and let’s not forget about Grok, which also is a platform for doing super important AI things that are very much in demand from people who AI.

CrewBulky9868

Spending over a hundred billion in CAPEX to day by day destroy their advertising platform is a feat that only Meta can achieve. I have advertised on Meta for almost 7 years and can say this has honestly been a fucking nightmare like most Meta tech projects where Zuck tries to prove Meta is something more than what they are. It is the only deployment of AI where the task at hand for the end user has 1. Gotten more time consuming and difficult and 2. Provides us way worse results compared to the more simplistic system before it. This entire AI move is pandering to Wall Street, but the smart Analysts see the CAPEX spend and execution for what it is like us advertisers do-- a complete failure. The only thing saving Meta is the lack of competition and growth in other countries as they "come online."

mykesx

This bubble is different. Instead of silly valuations and public offerings with small sales and big losses, this bubble us about spending multiple $trillions in CAPEX for 10s of $billions in sales.

KittyLover-7

OpenAI should just not go public, those revenue growth numbers are trash compared to the CAPEX plans

Damon2149

i want to understand, CAPEX is propping up the market right? More Capex spending results in more debt issuance. When more debt is issued it quite literally results in more pressure on the bond market. Theres no healthy scenario CAPEX spending continues to accelerate in this way before the bond yields increase to a point to where issuing more debt becomes economically disadvantageous. So unless AI spending results in an immediate return on investment. It will probably be healthy for the spending to slow a little and a correction to occur. Do you guys understand that the fuel that is accelerating the market is what is causing bond yields to shoot up? What causes the market to go up is simultaneously what brings bond yields up which is the problem causing them to go down today. It is natural a correction occurs and the spending slows a little to let the AI profits marinate and we can enter the next leg higher. The AI boom is a self limiting feedback loop until things consolidate and become more healthy.

MegalodonBite

Their CAPEX is revenue because they are leasing out compute - they lost the AI race. Thats not a bullish indicator.

nobertan

Unless capex ends up as a write down like all the reality labs ‘investments’. Sentiment and trajectory on AI infrastructure is turning and Meta has repeatedly flubbed on their model competitiveness AND traction since their early llama model gains. Fact is, due to demand they are massively overpaying for that capex. Then add the rapid depreciation of those assets classes… They need to demonstrate profit or efficiency improvements within the next year to have a hope of justifying the CAPEX impact on FCF.

KittyLover-7

Meta going to have to add a trillion to its CAPEX bill if it loses

theillcook

I said none of those things. If things are as you say: >Another day, another hyperscaler decline, due to ridiculous CAPEX ridiculous DRAM price gouging. why are you going against the flow if the trends are so clear, according to you. You hate making money or something?

Imaginary-Lake28

MFST down META down GOOG down AMZN down Sandisk +8% Another day, another hyperscaler decline, due to ridiculous CAPEX ridiculous DRAM price gouging. What a bunch of incompetent idiots.

NotMe357

By 2028 MAG7 CAPEX will be cut in half and the whole market will dumps

DruPeacock23

But AI companies are making record revenue and profits though? The recent drawdown were due to expected CAPEX spend. The forward PE is pretty reasonable for all the hyperscalers too.

Sandvicheater

And if they're spending $250B in CAPEX in 2028 then that projected revenue means nothing

Olangotang

You have to understand the three angles to refute the ridiculous amount of hype: Funding Craze and why it's regarded, where investors stand now The issues with the model architecture itself, which makes them expensive and not reliable. Doesn't mean they're useless though The power grid issues in the US It's all so fucked and it's fucking annoying replying to a psychosis bot who goes: "it will get better, faster, stronger," being totally okay with the exponential training costs (OPEX NOT CAPEX) of the models.

MajikoiA3When

This is hilarious. Backstop CAPEX spending with MOUs then when they come asking you start ghosting. Huang art of the deal.

rhetoricwall

If you spend enough time with AI you realize it has no common sense. Common sense is learned, in part, from facing consequences. There are no consequences learned from gradient descent, just updates. The AI bet, for some, is reaching AGI. AGI must have common sense. GPT2 did not have common sense nor does Fable 5. The Mag7 CAPEX not only reflects equity but also debt, debt which is financed by investors who were sold a dream. The dream is that AI will be the only worthwhile game in town once the dust settles. Here’s the biggest oversight in history; AI that needs a babysitter will take a lot longer to realize ROI than AI that doesn’t. Both could result in AGI but only one prevents a seismic collapse. Let me ask you a question. How long can you let Claude Code run without any babysitting before it totally fucks up? If your answer is ‘a long time’ the thing you’re doing has been done many times before. If your answer is ‘not very long’ then you realize we’re in a bubble. It will not be surprising that it bursts but it will be interesting how it bursts. It’s interesting that Franz Ferdinand’s assassination started a war but no one gives a shit. The war was inevitable, just like the bubble. The reason no one can tell you how it’s gonna happen is that there are infinite ways that it could and very few ways that it couldn’t.

rhetoricwall

If you spend enough time with AI you realize it has no common sense. Common sense is learned, in part, from facing consequences. There are no consequences learned from gradient descent, just updates. The AI bet, for some, is reaching AGI. AGI must have common sense. GPT2 did not have common sense nor does Fable 5. The Mag7 CAPEX not only reflects equity but also debt, debt which is financed by investors who were sold a dream. The dream is that AI will be the only worthwhile game in town once the dust settles. Here’s the biggest oversight in history; AI that needs a babysitter will take a lot longer to realize ROI than AI that doesn’t. Both could result in AGI but only one prevents a seismic collapse. Let me ask you a question. How long can you let Claude Code run without any babysitting before it totally fucks up? If your answer is ‘a long time’ the thing you’re doing has been done many times before. If your answer is ‘not very long’ then you realize we’re in a bubble. It will not be surprising that it bursts but it will be interesting how it bursts. It’s interesting that Franz Ferdinand’s assassination started a war but no one gives a shit. The war was inevitable, just like the bubble. The reason no one can tell you how it’s gonna happen is that there are infinite ways that it could and very few ways that it couldn’t.

rhetoricwall

If you spend enough time with AI you realize it has no common sense. Common sense is learned, in part, from facing consequences. There are no consequences learned from gradient descent, just updates. The AI bet, for some, is reaching AGI. AGI must have common sense. GPT2 did not have common sense nor does Fable 5. The Mag7 CAPEX not only reflects equity but also debt, debt which is financed by investors who were sold a dream. The dream is that AI will be the only worthwhile game in town once the dust settles. Here’s the biggest oversight in history; AI that needs a babysitter will take a lot longer to realize ROI than AI that doesn’t. Both could result in AGI but only one prevents a seismic collapse. Let me ask you a question. How long can you let Claude Code run without any babysitting before it totally fucks up? If your answer is ‘a long time’ the thing you’re doing has been done many times before. If your answer is ‘not very long’ then you realize we’re in a bubble. It will not be surprising that it bursts but it will be interesting how it bursts. It’s interesting that Franz Ferdinand’s assassination started a war but no one gives a shit. The war was inevitable, just like the bubble. The reason no one can tell you how it’s gonna happen is that there are infinite ways that it could and very few ways that it couldn’t.

rhetoricwall

If you spend enough time with AI you realize it has no common sense. Common sense is learned, in part, from facing consequences. There are no consequences learned from gradient descent, just updates. The AI bet, for some, is reaching AGI. AGI must have common sense. GPT2 did not have common sense nor does Fable 5. The Mag7 CAPEX not only reflects equity but also debt, debt which is financed by investors who were sold a dream. The dream is that AI will be the only worthwhile game in town once the dust settles. Here’s the biggest oversight in history; AI that needs a babysitter will take a lot longer to realize ROI than AI that doesn’t. Both could result in AGI but only one prevents a seismic collapse. Let me ask you a question. How long can you let Claude Code run without any babysitting before it totally fucks up? If your answer is ‘a long time’ the thing you’re doing has been done many times before. If your answer is ‘not very long’ then you realize we’re in a bubble. It will not be surprising that it bursts but it will be interesting how it bursts. It’s interesting that Franz Ferdinand’s assassination started a war but no one gives a shit. The war was inevitable, just like the bubble. The reason no one can tell you how it’s gonna happen is that there are infinite ways that it could and very few ways that it couldn’t.

rhetoricwall

If you spend enough time with AI you realize it has no common sense. Common sense is learned, in part, from facing consequences. There are no consequences learned from gradient descent, just updates. The AI bet, for some, is reaching AGI. AGI must have common sense. GPT2 did not have common sense nor does Fable 5. The Mag7 CAPEX not only reflects equity but also debt, debt which is financed by investors who were sold a dream. The dream is that AI will be the only worthwhile game in town once the dust settles. Here’s the biggest oversight in history; AI that needs a babysitter will take a lot longer to realize ROI than AI that doesn’t. Both could result in AGI but only one prevents a seismic collapse. Let me ask you a question. How long can you let Claude Code run without any babysitting before it totally fucks up? If your answer is ‘a long time’ the thing you’re doing has been done many times before. If your answer is ‘not very long’ then you realize we’re in a bubble.

Forest_City_Frolfer

So 70.7M in revenue (60M Q1) before Excise taxes and 45.8M in Net Revenue (39M Q1) 7.7M in net income (3.7M Q1) Inventory Impairment of 1.2M Margins of 55% (Based off Net Revenue) Cash Flow from Operations of 13.4M 65M In cash and receivables against 46M In current Liabilities - Comfortable cash position Spent 5.7M Buying back shares, just over half the total allowed under the NCIB already They seem to be firing on all cylinders. Still not needing to pay income taxes is beneficial. They keep saying they have 12M in CAPEX to spend this year but haven't said what that will entail yet. I'm keeping an eye on that Overall, another stellar report from a Canadian LP. The fact they are generating that much Net income in these harsh conditions, and without any paper gains from the change in fair value of biological assets is really impressive.

MikeCheck_CE

You're not wrong about the demand, but there's a few main risks: The price has already rallied an INSANE amount. That growth isn't normal, and it doesn't last forever. A lot of future growth is already baked in. The supply for the next ~2 years is already sold, so how are they going to deliver any surprise earnings for the next 2 years? They can't... The surprise will be increased CAPEX to expand risk for what is traditionally a very cyclical product as to whether the demand will still be there by the time the expansion is done). Also the hyperscalers aren't going to keep paying more and more for memory, it will eventually break their business case. The market MUST find workarounds to avoid handing all of money to Samsung and SanDisk or the hypergrowth stops. Companies like CXMT will close the gap. Companies like NVDA, AVGO and MRVL are finding ways to reduce memory through modifications to the chips, ASICs, photonics... That said, I would expect a rally on semis in the fall when most of them report Q2 results. Right now it's mostly software earnings.

giddycocks

But somehow Oracle, Google and others investing in CAPEX is a cardinal sin. Make it make sense. 

Big_Sea3548

I think an unintuitive thing for most that haven’t taken an accounting class is that Earnings are not an indicator of a company’s profitability. Want to increase earnings immediately ? Cut the R&D budget. Shut down CAPEX projects. Earnings will shoot up in the short term. Is the company. Is the company healthier now? Want to lower earnings to pay less taxes? Accelerate depreciation. Increase CAPEX. Is the company healthier? That’s why analyzing cash flows and the durable nature of the company’s growth is so important. Earnings matter, but you can’t just say “earnings down so stock must go down”.

KittyLover-7

AI companies be like “WE GREW REVENUE BY 100% YOU” with a 300% increase in CAPEX

aka0007

Actively not. I hold some MU and NVDA. My main concern with AI is any disruption (disruption being something that prevents build-out of data centers resulting in reduced CAPEX, if even temporarily) will cause profits of infrastructure companies (NVDA, MU, SMCI, etc) to plummet. I think companies at the hyperscaler level (GOOG, MSFT, AMZN, etc) are much less likely to face any disruption as demand for AI is something I believe will continue to increase faster then their ability to supply it. AI is just something the more it is used the more it needs to be used. The demand never decreases, perhaps at points it may slow down increasing due to pricing and utility but eventually the utility will improve and demand will increase. Bottom line.. I think companies like MU are probably good to invest in but I prefer to be more heavily invested in companies like GOOG.

You_Will_Fail1

CAPEX is 3 times bigger than revenues???

GarenEnjoyer_99

What, do you think Amazon, Google and Microsoft are the only companies in the world providing compute? It's like saying the smaller no-brand gas stations shouldn't exist when there are Shell & Exxon. Yes, the business is CAPEX heavy, but the smaller providers like Coreweave, Nebius, Iren, etc., have oretty much copied the obsolete policy of the big boys (meaning Google intending to use Nvidia GB200 for 6 years, for example). Additionally, some of the providers or so-called neoclouds are not just bare-metal, but have additional layers on top (Nebius has all). I'm not even in Coreweave, but I think your logic is wrong.

Lunarisation

Total AI CAPEX commited is 2.7T cumulative till 2029. If you think Open AI and Anthropic can net 2.7T by 2032, let alone 2029, I'll have whatever you're smoking

Significant_Speed854

So is CAPEX good or bad now? The rhetoric seems fickle.

lespaul991

Actually economists are comparing the AI bubble to 2008 because of excess financing of CAPEX.

Open_Pollution_8038

My thesis is CAPEX is leveling off and revenue will continue to expand at the sub 30% they’re growing. People hate Zuck but when he said the internal ROI on the datacenter use cases they’re seeing justifies the spend that just tells you there’s projects everywhere to juice the core business. I actually prefer this over what Microsoft/Google/etc is doing which is just be a GPU landlord (end game on that is low margins lol).

vertigo88

If they started. Making chips is effectively voodoo magic. It’s difficult, and took the combined efforts of an entire nations engineers to pull off what is an engineering miracle. Trade works because it allows specialization and deep understanding of what is being done, both in NVDA’s chip design and TSM’s production. Neither could do it as well alone. Now let’s say NVDA does the stupid thing and invests in chip production. How much CAPEX and time do they need to become a fraction as good as TSM, and why would I want that as an investor? Hell - reinvest in your own designs, or do stock BB.

vertigo88

If they started. Making chips is effectively voodoo magic. It’s difficult, and took the combined efforts of an entire nations engineers to pull off what is an engineering miracle. Trade works because it allows specialization and deep understanding of what is being done, both in NVDA’s chip design and TSM’s production. Neither could do it as well alone. Now let’s say NVDA does the stupid thing and invests in chip production. How much CAPEX and time do they need to become a fraction as good as TSM, and why would I want that as an investor? Hell - reinvest in your own designs, or do stock BB.

vertigo88

If they started. Making chips is effectively voodoo magic. It’s difficult, and took the combined efforts of an entire nations engineers to pull off what is an engineering miracle. Trade works because it allows specialization and deep understanding of what is being done, both in NVDA’s chip design and TSM’s production. Neither could do it as well alone. Now let’s say NVDA does the stupid thing and invests in chip production. How much CAPEX and time do they need to become a fraction as good as TSM, and why would I want that as an investor? Hell - reinvest in your own designs, or do stock BB.

AdJazzlike1002

"What happens when free tiers shrink and the best AI costs $20-30/month?" That's optimistic, for most AI companies (including OpenAI and Anthropic) that would be a loss, not a gain. There's a reason why they're starting to test out advertising. A lot of the lower end of the market wouldn't even be able to cough up the extra £360 a year at those numbers, but if it's £60 a month? i.e. £720 a year? that puts a lot of people off and £60 a month might still be a loss for these companies. Even at an enterprise level, a lot of companies are walking backwards from AI, as they're had to start paying the true cost, they've become far less keen. Also, tasty little fact, the CAPEX cost which AI companies have been occurring are now going to be happening on a 5-year cycle, constantly, because GPUs only have a 5 year lifespan, so every 5 years they've going to have to raise all of this money again, somehow, to do all of this again, just to sustain what they have. I don't think that the AI bubble is going to burst until we start to hit 2030 and people are seeing that the revenue that AI is raising cannot cover the massive capital investment needed to sustain it.

SanDisk_Made_Me_Rich

Jensen is pulling out all stops to keep the AI CAPEX FOMO spending to infinity. $500 jumbilloon fucking dollars

oooofukkkk

No, you are conflating CAPEX grid margin with R&D inference, but that requires a *two* party inverse spend (which makes no sense).

vba7

As much as I agree that issuance happen and dilute the shareholders... > How do you think companies in Intel's position fund capex expansions aside from borrowing money? One could expect that a company that IPOd in 1971 would fund CAPEX the "old" way - aka from its revenue, perhaps by issuing corporate bonds or via a bank loan. This way they dont dilute the investors and use the "MBA approach" that supposedly they develop faster thanks to investing someone else's money - so they can repay the interest and still earn on top. I mean, why would the shareholders allow to get diluted?

BiotekFuture

Hyperscalers are in an arms race and don’t seem to care what CAPEX looks like. At this point investing in them feels like buying a lottery ticket for the chance to own shares in Cyberdyne Systems before Skynet goes live.

Asurafire

That’s not true, inference has a 50% grid margin, the spend is on CAPEX and R&D.

htowns

incredibly misleading statement, 40% of capex is power generation, 10% is land and site work, 20% is electrical infrastructure and 30% is AI hardware of which maybe half of that is GPUs? so 15% of data center CAPEX has an economic life of 5 years (and it’s not like these top line GPUs from five years ago are going to have zero resale value).

ProcedureHopeful2944

How does it justify their CAPEX if it’s open source that runs locally?

RoccoForte

Now that they have lost the AI race , they are promoting the idea of open source models to justify their CAPEX spent ..

bsplondon

everything has been said, but the only thing I want to add is if you think GOOGL will be >$400 (your breakeven) in 18 months time. If so, you wont lose a penny. If it ends at $399.99 you have lost the call. Personally, I think doing your homework and deep dive what is going to drive the price in the next 18 months is the key to your thesis. My view is that GOOGL (and most mega caps) are currently in the peak of CAPEX cycle, they are spending more on CAPEX than bringing in from the ongoing operations - This means FCF is negative. When (not if) those circumstances switch place (i.e. more income than CAPEX) you will see this and all other big AI tech take off. With a Breakeven of $400 - Chill and watch the market do its thing.

Illustrious_Mood_274

It’s Ai Software! No data center CAPEX And SOUN will be the 1st COMPLETE Ai Machine with the only self-learning Ai and zero disconnects…The others will be the followers

SnooCookies8223

No 3-5 year Data Center CAPEX ROI. Keyvan has still not replaced CEO for a reason and head count will continue to go down in the SOUN AND future LivePerson sub. They will pave the path for how self-learning Ai improves BOTH SALES AND EFFICIENCY. Q3 results are going to rip faces off..

SnooCookies8223

I believe the market is “surprising” us. The gig is out. Institutions and smart money determine price, not analysts. People laugh at comparing us with $NVDA, but we have no data center CAPEX, just the only self-learning AI machine that will spread wealth through efficiency, reducing costs while increasing sales and SOUN will be the leader in proof of concept, IMHO Enterprise and government will explode due to fast deployment now (minutes, not weeks), and data privacy. If you’re not first, your last

SnooCookies8223

It’s Ai Software! No data center CAPEX And SOUN will be the 1st COMPLETE Ai Machine with the only self-learning Ai and zero disconnects…The others will be the followers…

777_heavy

You don’t think it’s going to be another high CAPEX dump?

Illustrious_Mood_274

The gig is out. Institutions and smart money determine price, not analysts. People laugh at comparing us with $NVDA, but we have no data center CAPEX, just the only self-learning AI machine that will spread wealth through efficiency, reducing costs while increasing sales.

Illustrious_Mood_274

It’s Ai Software! No data center CAPEX And SOUN will be the 1st COMPLETE Ai Machine with the only self-learning Ai and zero disconnects…

Illustrious_Mood_274

It’s Ai Software! No data center CAPEX And SOUN will be the 1st COMPLETE Ai Machine with the only self-learning Ai and zero disconnects…The others will be the followers

Illustrious_Mood_274

It’s Ai Software! No data center CAPEX And SOUN will be the 1st COMPLETE Ai Machine with the only self-learning Ai and zero disconnects…The others will be the followers… https://preview.redd.it/otzu7pdsyzhh1.png?width=202&format=png&auto=webp&s=b38ee5639d93230ea1fde3529c2d51507f58100d

Illustrious_Mood_274

It’s Ai Software! No data center CAPEX And SOUN will be the 1st COMPLETE Ai Machine with the only self-learning Ai and zero disconnects…The others will be the followers… And everyone here who bought under $12 will be! 😊 Bullish []() []()

IvoryTowerResident

unpopular opition but CAPEX is actually good for main street. Before CAPEX all the Mag7 did was buy back shares and enrich wall street. Now they are actually build stuff and using that money buying materials and creating high paying jobs. I think the future looks much brighter

Alt_rio

that surge comes from 16B of CAPEX to achieve 1B of ebitda. they cannot sustain this level of investment without raising more funds.

ShootWild

You are assuming there’s no ROIC. These companies wouldn’t be increasing CAPEX if they don’t believe that investment will boost their earnings.

Ordinary_Repeat7637

Today’s massive CAPEX becomes tomorrow’s depreciation, and data centers, servers, and GPUs require constant maintenance, upgrades, power, and eventual replacement. That means some of this spending may become recurring just to maintain the infrastructure Meta has built, not purely to generate new growth. It also adds cyclical risk: if AI demand or advertising weakens after the buildout, Meta could be left with huge fixed costs and rapidly depreciating assets.

Madison_369

High CAPEX doesn’t mean the PE is misleading. Meta is still earning all that, they are just choosing to reinvest it instead of payout dividends. If anything I’d argue Meta’s earnings are probably the cleanest amongst the big tech because they are currently the most highly diversified to B2C, serving the end users rather than making much of your earnings from large the circular AI infrastructure / data centre contracts money.

interesting_vast-

\~90B cash vs \~18B/Quarter of CAPEX spend, give or take 6 quarters till they need more cash, GS just glazing so they can lead the next equity round

greenpride32

>The higher multiple is the part I don't really get. Are investors just betting Apple figures out AI eventually? A lot of rotation has gone into "safety" plays, to the point SCHD 12m trailing was beating both SP500 and NAS100. Just in the past few days or so NAS100 has taken back the lead. KO had been trading at similar or higher multiples than AMZN GOOGL MSFT NVDA. I sold a portion of my AAPL when it ran up (maybe $335-ish so didn't quite hit the top), as I think it's overvalued relative to others, in same way I sold some SCHD for VOO and QQQM. A company shouldn't be rewarded for not making CAPEX spend, it does nothing material to the bottom line. Also, it makes sense for AMZN GOOGL MSFT to invest heavy into AI as they are hyperscalers - CPU dominated compute is now becoming CPU + GPU. But AAPL has no business here.

WickOfDeath

CAPEX ...

Midpoint60

Google search-engine is searching for some CAPEX return. Yes -- this dump hurts my port - ouch.