AI capex cycle remains war-proof despite rising risks
Allianz Trade reports that the artificial intelligence (AI) capital expenditure (capex) cycle remains war-proof for now. Investor focus has shifted from profitability to revenue growth and cash flow visibility.
The capital expenditure (capex) cycle for artificial intelligence (AI) is proving resilient despite escalating geopolitical tensions and macroeconomic uncertainties, according to a report by Allianz Trade. The analysis indicates that investor scrutiny has moved beyond the potential for profit boosts to assessing how companies can monetize their substantial investments and ensure cash flow.
Hyperscale providers are expected to significantly increase their capex in 2026, with estimates pointing to approximately USD 575 billion, a 50% rise year-on-year. Concurrently, software companies face growing concerns about AI potentially diluting demand for traditional service lines.
Rising geopolitical volatility, particularly in the Middle East, has reinforced a rotation away from high-valuation tech stocks. Nonetheless, the technology sector's capex supercycle is expected to remain intact, supported by strong, counter-cyclical demand. Public sector investments in digital infrastructure and data centers are accelerating, bolstering the structural growth outlook.
Energy price volatility may reshape the allocation of capex rather than its overall scale. While near-term spending appears secure, the current concentration in data centers and cloud infrastructure could evolve. Higher chip costs might delay projects and accelerate the adoption of leasing models. Simultaneously, the case for diversifying the production of critical equipment and raw materials away from Asia is strengthening as current tensions expose supply chain concentration risks.