Data-center reality check could slam brakes on AI earnings boom
US corporate earnings are already running almost 60 percent above trend, with rapid growth still expected for years, mostly thanks to the AI boom. But the questionable economics of new AI data centers could pop this bubble.
U.S. corporate earnings have surged nearly 60% above trend, largely due to the AI boom. However, the economics behind new AI data centers may bring this growth to a halt. Analysts predict S&P 500 earnings per share will grow faster than 27% in the next year, but this projection may be overestimated. The massive AI infrastructure spending has transformed these firms into capital-intensive businesses, thinning their previously robust moats.
As hyperscalers like Google, Microsoft, Meta, Amazon, and Nvidia compete fiercely for AI market share, they risk losing revenue growth if their preferred AI model providers falter or face increased competition. This could lead to higher capex costs with no immediate payoff, potentially causing a drop in revenue for semiconductor firms and overall S&P 500 earnings.
Written by urgent.news from The Jakarta Post's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
