Stock market worries over an AI-related bubble have waned recently, leaving the tech-heavy US NASDAQ 100 index less than 2% below its previous – end-October – peak. This is unlikely to be the last time, however, that investors worry about the ability of tech companies to generate an adequate return on the large (AI-related) capital expenditures they are making.
As our graph of the week illustrates, investment has risen sharply over the last year (orange line). It also shows that the rate of increase is forecast to slow in the years ahead. Earnings expectations have been rising too, albeit not as quickly as spending.
The return on today’s capital investment make take some time to be realised, but we are confident it will be in time.
Also read our Monthly Market Viewpoint ‘Bubble trouble’.
