Edward Yardeni, president and chief investment strategist at Yardeni Research Inc., speaks during a panel discussion.
Ramin Talaie/Bloomberg via Getty Images
Markets are feeling less upbeat about the AI trade lately.
Spending concerns and fears over rising rates and the economics of AI are brewing.
But market veteran Ed Yardeni says investors have three reasons to stay bullish.
The AI trade has been rattled in the last month, with Alphabet ‘s dismal third-quarter results on Wednesday that latest source of angst for investors.
But market veteran Ed Yardeni says investors should think about three things to quell their anxiety.
Investors are increasingly questioning whether massive AI spending will yield the results they want to see. Microsoft’s decision to scale back its AI capex forecast likely isn’t helping soothe fears that AI isn’t paying off, and capex questions continue to swirl around the other big hypercalers, but Yardeni says that the good news still outweighs the bad.
Here are three positive signs he’s keeping tabs on.
Spending remains robust
While Microsoft dialed back its capex forecast for the year, Yardeni sees significant spending from other tech leaders. He highlighted the collective $235 billion AI financing figure that this week brought as a reason the sector is likely to keep growing.
This number included $100 billion that Anthropic could raise from its IPO, as well as also $95 billion that Meta is anticipating to raise via new stock sales, and Elon Musk’s move to have SpaceX borrow $40 billion to purchase new GPUs.
AI economics are encouraging
Yardeni’s view of AI economics is centered on Anthropic, and he sees several reasons the AI lab’s success should indicate to investors that AI compute demand is both strong, and sustainable.
“First, H1 revenues surged from $1.2 billion to $16.3 billion y/y,” he listed. “Second, operating losses narrowed from $2.1 billion to $693 million, with Q2 marking its first quarterly operating profit. Third, 11,900 customers now spend at least $100,000 annually, up from roughly 950 a year earlier. Fourth, revenue per dollar of compute expense increased more than fivefold to $2.08.”
Chip earnings have been strong
Yardeni also said he believes infrastructure demand will remain strong, as evidenced by Sk Hynix ‘s Q3 earnings smash that sent chip stocks higher on Wednesday.
“Management expects memory shortages through 2030, with production effectively sold out through 2029, suggesting durable demand and pricing power,” he said of the South Korean chipmaker.”These developments reinforce our view that the AI investment boom is here to stay.”
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