Exploring the capital-intensive turn in cloud infrastructure

US cloud service providers (“hyperscalers”) have entered the generative AI race, and their large capital expenditure is only expected to increase. Even with this higher level of spending, higher depreciation costs aren’t yet reflected in earnings, because some cloud providers are leasing infrastructure. However, a large amount of this expenditure is on servers that could become obsolete quickly, hurting future earnings. As hyperscalers make more industrial-style investment decisions, investors need to be structurally selective to weather business cycles. Learn more about the structural shift...