Morgan Stanley estimates $1.58 trillion in hyperscale and neocloud AI spending in 2027

Morgan Stanley estimates that hyperscalers' and neoclouds' combined AI spending will total $1.58 trillion in 2027. The bank arrived at this figure after including data center leases in capital expenditure, and noted that hyperscalers hold more than $1.1 trillion in leases that have not yet commenced; such leases are economically similar to debt-financed purchases but are not counted as capital expenditure. The report also said that about 65% of this spending (roughly $1.03 trillion) will flow into the revenue of S&P 500 constituents, of which Nvidia will capture about $690 billion, or 44% of the entire budget, while the other 499 constituents will collectively receive about $340 billion, and another roughly $550 billion will go to South Korean memory makers, Taiwanese ODMs and private companies. The report expects 2027 to be the year with the largest free cash flow shortfall for hyperscalers, and neoclouds that build GPU rental businesses financed by project debt and convertible bonds will be most sensitive to financing costs.

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1. Oct 20· 2 reports

   Morgan Stanley estimates $1.58 trillion in hyperscale and new cloud AI spending in 2027

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