Big Tech Pours Massive Investments into AI... But Actual Profits Go to These Industries [Weekend Money]

Supply Shortages in Semiconductors, Power Systems, and Cooling Sectors
Cautious Approach to New Capital Investments Due to 'Cycle Learning Effect'

Global hyperscalers such as Google and Microsoft (MS) are turning to external funding to invest in artificial intelligence (AI) infrastructure, drawing attention to semiconductor companies and other downstream suppliers.

On June 7, DB Financial Investment stated in its report "Hyperscalers Entering a Phase of External Capital Dependence" that, following Meta and Oracle, Amazon, Google, and Microsoft are now facing difficulties in fully covering AI investments with their own cash reserves.

For these companies, capital expenditures excluding operating cash flow and net cash turned positive last year. This figure includes lease liabilities but excludes various off-balance sheet debts such as non-initiated lease contracts and joint venture (JV) partnerships, indicating that external funding is essential for hyperscalers. However, the report also notes that the financial soundness of hyperscalers remains solid, so there is no immediate cause for concern.

In contrast, downstream suppliers such as semiconductor companies are showing caution toward new capital investments, reflecting lessons learned from previous cycles. According to a comparison between new capital investments in the U.S. GICS (Global Industry Classification Standard) semiconductor and non-semiconductor IT sectors, recent IT sector investment in semiconductors remains limited, while non-semiconductor investment far exceeds that in semiconductors.

Downstream suppliers are expected to continue playing a leading role in the market. The disparity in new capital investment intensity between upstream and downstream companies within the value chain has turned positive in sectors such as semiconductors, power systems, and cooling. This suggests that supply pressures in these industries are intensifying.

Jinkyung Lee, a researcher at DB Financial Investment, said, "Since the market is currently focused on the improvement of suppliers' profits, it is necessary to ride the upward trend in these industries, which is based on supply-demand asymmetry."

This content was produced with the assistance of AI translation services.