Barclays said that fears of an AI “bubble” are overstated, arguing that hyperscalers’ strong cash generation supports continued investment in artificial intelligence.
“Hyperscalers are generating enough operating cash flow to invest in AI with one hand and return cash to shareholders with the other, a stark contrast to dotcom era tech infrastructure builders,” Barclays wrote.
The bank added that “we stress-tested some capex assumptions, but believe AI investment remains on solid fundamental footing.”
According to Barclays, hyperscaler capital spending is “ramping quickly, but remains fully funded by operating cash flows.”
Even after accounting for share repurchases, the firm said there is “still a good amount of headroom before cash going out overtakes cash coming in.”
Barclays contrasted today’s environment with the early 2000s, noting that “the big telco spenders in 2000 were funding dotcom-era infrastructure with a great deal more financial leverage and a great deal less operating leverage than the hyperscalers are bringing to the table for AI in 2025.”
On the demand side, Barclays highlighted that “700m+ users are pinging ChatGPT every week” and that “1 in 10 U.S. companies are citing AI-driven efficiency gains.”
The firm said these data points “point to solid foundational demand as AI workloads kick into a higher gear with advanced reasoning models and agents.”
Still, Barclays acknowledged that “the sheer scale of investment raises execution risks.”
It pointed to signs from private markets, where demand for capital is growing even as “VC capital [is] increasingly harder to come by and multi-billion dollar private credit deals [are] announced in the AI space this year.”
Overall, Barclays concluded that “strong cash generation by the hyperscalers is keeping the AI infrastructure build-out on solid financial footing for now.”
Source :
https://www.investing.com/news/stock-market-news/ai-investment-remains-on-solid-fundamental-footing-barclays-4257672
