- AI hype deflates amid the capex-monetization debate. Despite strong recent earnings, investor focus has shifted from profitability boost to revenue growth trajectory and cash-flow visibility, particularly given hyperscalers’ elevated capex plans (≈USD575bn, +50% expected in 2026) and weakening sentiment toward software amid risks of AI-driven revenue dilution. Our AI Bubble Risk Monitor continues to signal moderate bubble pressures: exuberant positioning has cooled, but widening credit spreads send signals of a higher market sensitivity over balance-sheet quality. Rising geopolitical tensions in the Middle East have further reinforced a rotation away from high-valuation tech as risk-off dynamics regain prominence.
- The higher volatility regime will test the AI development regime, but the capex supercycle remains intact for now, supported by strong, counter-cyclical demand. Technology capex has historically been sensitive to the macroeconomic environment and notably energy shocks as new inflationary pressure often results in higher interest rates, and consequently higher investment costs. In the US, tech is among the capital-intensive sectors most negatively impacted by severe energy price variations (~-30% correlation) but unlike energy, basic materials and utilities, the drop in investment does not result from windfall benefits stirred up by price effects. Nevertheless, hyperscalers’ dominant market positions and substantial cash reserves reduce sensitivity to macroeconomic and geopolitical shocks. In parallel, public-sector investment is accelerating, driven by digital sovereignty and infrastructure build-out agendas. The data-center pipeline is robust (x2 at ~200GW by 2030) and momentum remains resilient despite geopolitical tensions, as illustrated by Germany’s plan to double its capacity over the same horizon.
- Energy volatility may reshape capex allocation rather than overall scale. While near-term spending levels appear secure, the current concentration in data centers and cloud infrastructure could evolve. AI-related orders benefit from priority access within semiconductor supply chains, limiting immediate exposure to potential disruptions in South Korea and Taiwan linked to LNG and helium supply risks. However, a further ~50% increase in chip costs – as seen in Q1 2026 – could delay project timelines and accelerate the shift toward leasing models to share capital intensity (with estimated savings of 20–30%). At the same time, the case for expanding critical equipment and raw material production outside Asia is strengthening as current tensions expose the risks of supply-chain concentration and may rebalance investment away from the current bias toward software and computing services.
- How are markets trading the “AI theme”? Focus is shifting from efficiency gains to revenue delivery. While consensus broadly reflects current momentum, it is increasingly exposed to execution risk on both capex discipline and revenue realization. Valuations – mid-20s P/E for large caps – remain broadly justified but are vulnerable to short-term rotations in a high-volatility environment. The long-term outlook remains supportive, with capex anchored in tangible infrastructure orders that are partly decoupled from the pace of AI adoption. However, value creation is likely to be uneven across the technology stack, with relative winners in semiconductors and telecom equipment, and more challenged segments in software and consumer electronics.
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Alexander Hirt
Allianz Investment Management SE