“The AI investment wave is far from over—will supply and demand only reach balance by 2028?

The staggering capital expenditure figures reported by major tech companies such as Alphabet, Meta, and Amazon are far from the end of the story, because the industry is racing to build artificial intelligence (AI) infrastructure.

The expected supply-demand balance for AI won’t be achieved until the first half of 2028. As a result, the imbalance is likely to persist for a long time. This means more capital spending and revenue growth are needed, but the supply chain is still constrained in many ways.

With the supply chain so tight, memory prices are rising. Chip prices are also higher than they were six months ago—even higher than they were twelve months ago. As a result, all input costs are increasing. In addition, data centers also face demand for acquiring land and building facilities— even for data center capacity that is currently vacant—because companies are trying to seize the lead so that when components are ready in two or three years, or even four years, they can be put into use immediately.

SpaceX is expected to invest $200 billion per year in the AI sector over the next two years.

And the most critical question now is whether the large-scale investments by big tech companies in AI have already been reflected in their stock prices. Many companies—such as Tesla—saw their share prices plunge in the last earnings season due to worries about spending.

I believe that large high-tech companies are shifting from focusing on the size of capital expenditures (regardless of whether they’re good or bad) to focusing on the visibility of capital expenditure returns. As this theme continues to dominate discussions among investors, attention to both absolute amounts and the visibility of returns will increase. This will lead to further expansion of the price-to-earnings ratio.

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