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LIVE MARKETS-The AI bull equation: CapEx + Time = Profits

By Reuters News

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THE AI BULL EQUATION: CAPEX + TIME = PROFITS

Volatility in the AI trade has gripped markets lately, but Citi argues investors are, nevertheless, underestimating the revenue growth that hyperscalers can generate from their huge spending on AI infrastructure and data centres.

While combined revenue growth at Amazon's AWS, Microsoft, Google and Meta accelerated to 25% in the third quarter, it says the scale of capex coming online points to further acceleration.

Citi sees growth reaching around 30% next year, three points above consensus, as enterprise adoption gathers pace, despite bottlenecks in equipment, regulation and financing.

For the US bank, the equation is simple:

"Near-term fluctuations in both supply and demand will create modest bends in the S-curve, but hyperscalers' 3Q results continue to point the scale of the opportunity, reinforcing our view that CapEx + Time = Profits."

(Danilo Masoni)

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