1Q26_ Quarterly Outlook Report_Final_EN - Flipbook - Page 19
T H E P LUMB LI N E | A RETU RN TO F I RS T PRI N CI PL ES
AI-related capex has picked up
Capital expenditures (US$ billions)
160
Forecast
period
120
80
40
0
1Q20
4Q20
3Q21
2Q22
Amazon
1Q23
Meta
4Q23
Alphabet
3Q24
2Q25
1Q26
4Q26
Microsoft
Source: Bloomberg Finance LP, Scotia Wealth Management
Private investment in technology as a share of GDP has increased to levels last seen in 2000
but remains slightly below trend
5%
ChatGPT launch
4%
3%
2%
1%
0%
1960
1968
Recession
1976
1984
1992
2000
2008
2016
2024
Non-res fixed investment (info processing & software - % of GDP)
Source: Bloomberg Finance LP, Scotia Wealth Management | Based on U.S. data
Cash per share in the information technology (infotech) sector is much higher than in the past,
and both operating and net profit margins are stronger, indicating that firms have ample liquidity
and healthy underlying profitability to fund expansive investment. If we narrow the focus to the
companies actually driving this spending – the Mag 7 today and the 7 largest dotcom era tech
firms by market capitalization – the contrast remains evident. Today’s leaders are roughly three
times larger as a share of the S&P 500’s market capitalization than the top seven tech names of
2000, yet they also generate far stronger profits and hold materially higher cash on their books.
As such, while capex spending is large, the companies embarking on this spending are more
financially resilient than their predecessors, even if execution risks remain.
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