Apollo Economist Warns AI Boom Could Hit Markets If Returns Lag Spending

Analyst Impact 4
โดย GuruFocus·US·Read original
Summary · why it matters

Apollo Chief Economist Torsten Slok warned that the AI boom could become a market-wide problem if returns on massive hyperscaler spending arrive later than investors expect. Alphabet, Meta, Microsoft and Amazon are collectively expected to generate nearly $470 billion in free cash flow by 2030, but Slok argues that weaker monetization could leave earnings, margins and stock valuations exposed. He noted that companies outside the major technology sector are spending heavily on AI without yet seeing a meaningful improvement in profit margins, and the longer those returns take to materialize, the greater the risk of a pullback. Apollo estimates hyperscaler capital expenditure could reach roughly 3% of U.S. GDP annually from 2027 through 2029, more than double the peak of the late-1990s telecom buildout as a share of the economy. Microsoft spent $41 billion on capital expenditures in its latest quarter while generating $19.6 billion in free cash flow, and its cloud gross margin slipped to 65% partly due to AI infrastructure investment.

Impact on stocks 5

Artificial Intelligence▼ · 4 stocks
Microsoft Corporation
MSFT
▼ NegativeCapitalrelevance

Microsoft's cloud margin slipped due to AI investment; warning highlights risk.

Amazon.com Inc
AMZN
▼ NegativeCapitalrelevance

Apollo economist warns AI spending may not yield returns, exposing earnings and valuations.

Alphabet Inc Class C
GOOG
▼ NegativeCapitalrelevance

Alphabet is among hyperscalers with heavy AI capex, risk of delayed returns.

Aging Population▲ · 1 stocks

Theme Impact 2

Related news

IREN Fair Value Trimmed to US$79.03 as AI Cloud Wins Meet Build Out Risks

IREN's fair value estimate has been trimmed from US$80.93 to US$79.03, a modest adjustment reflecting a mix of growing AI cloud contracts and ongoing questions around execution and supply build out through 2027. The revision lifts revenue growth assumptions to 168.01% from 125.79% and net profit margin expectations to 11.73% from 5.79%, while the future P/E assumption drops to 31.26x from 90.29x and the discount rate rises to 9.41% from 8.83%. On the bullish side, JPMorgan shifted IREN from Underweight to Overweight with a US$65 price target, citing a partnership with Nvidia, new customer signings and higher industry pricing, while H.C. Wainwright raised its target to US$90 after IREN announced US$2.8b of new multi year AI cloud contracts and lifted its 2026 AI cloud annual recurring revenue target to more than US$4b. Northland initiated IREN at Outperform with a US$99 price target, and Freedom Capital upgraded the stock from Hold to Buy. Freedom Capital nonetheless flagged execution on supply additions over the next two years as a central risk, noting the story depends heavily on adding capacity on schedule.
IREN ▲JPM ▲
Artificial Intelligence ▲Cloud & Digital Infrastructure
Simply Wall St·8hRead more →
impact 4

Nvidia-Backed Nscale Files for US IPO After $1.02 Billion Loss

Nscale, the London-based AI data center developer backed by Nvidia and Microsoft, filed publicly for an initial public offering in New York, seeking to raise as much as $3 billion. The company reported a net loss of $1.02 billion on revenue of $140.6 million for the six months ended June 30, compared with a net loss of $368.9 million on revenue of $10.4 million a year earlier, according to its Friday filing with the US Securities and Exchange Commission. Spun off from a cryptocurrency mining operation in early 2024, Nscale was valued at about $14.6 billion in a March Series C round led by Aker ASA and 8090 Industries, with Nvidia and Nokia Oyj also participating. The company has agreed to add more than 30,000 Nvidia chips to an existing rental agreement with Microsoft at its Narvik, Norway gigafactory, and Anthropic has agreed to spend $45 billion to rent AI cloud computing power from its flagship West Virginia data center development. The offering is being led by Goldman Sachs, JPMorgan Chase and Morgan Stanley, with shares expected to trade on the New York Stock Exchange under the symbol NSCL.
NVDA ▲MSFT ▲GS ▲JPM ▲MS ▲0MJX.LSE
Artificial Intelligence ▲Cloud & Digital Infrastructure
Bloomberg·9hRead more →
▲2

Tigress Analyst Raises Alphabet Price Target to Street-High $485

Tigress Financial Partners analyst Ivan Feinseth reiterated a Strong Buy rating on Alphabet and raised his price target to a Street-high $485 from $415, implying roughly 39.6% upside. The bullish thesis centers on Alphabet turning its massive AI investments into growth across Search, Cloud and Gemini, with Feinseth arguing AI Overviews and AI Mode can make Google more useful for complex, high-intent queries. Recent results support that argument: Alphabet's second-quarter revenue rose 24% from a year earlier to $119.8 billion, Search and Other revenue increased 17%, YouTube advertising grew 13%, and operating income climbed 30% to $40.77 billion. Google Cloud revenue surged 82% to $24.8 billion, operating income more than tripled to $8.8 billion, margins reached 35.6%, and its $514 billion backlog gives visibility into future enterprise demand. Gemini has reached 950 million monthly active users, more than 9 million monthly developers and roughly 22 billion API tokens processed per minute, and Feinseth sees monetization opportunities across subscriptions, APIs, enterprise software, agents and productivity products, though the risk remains that Alphabet must prove its enormous AI spending generates sufficient returns.
GEMIGOOG
Cloud & Digital Infrastructure ▲Artificial Intelligence ▲
GuruFocus·10hRead more →
© 2026 MarketDXNews