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AI Megacycle: Big Tech Boosts Capex Over Payouts
26 Mar
Summary
- Big tech firms will prioritize capital expenditure over shareholder returns.
- Seven major tech companies are expected to generate $1.3 trillion in operating cash flow.
- Nvidia, Alphabet, and Amazon are projected to be key revenue growth drivers.
Big tech companies are entering a significant "megacycle" driven by artificial intelligence, according to HSBC. This trend is expected to lead to a substantial increase in capital expenditure (capex) as these firms prioritize investment over shareholder returns.
These seven major technology players are projected to generate $1.3 trillion in operating cash flow before taxes and interest this year. HSBC anticipates that capex will consume 61% of this cash flow, a notable increase from previous allocations.
Nvidia is forecast to be the fastest-growing contributor to the group's revenue, with Alphabet and Amazon also playing crucial roles. Oracle's growth acceleration is tied to its cloud revenue arrangements with OpenAI.
HSBC maintains positive ratings for most of these companies, citing their strong positioning in AI infrastructure and compute. However, Apple receives a more conservative outlook.
