Are markets underestimating the AI investment cycle?
August 26, 2026
For the past two years, investors have questioned whether the AI buildout would ever generate returns sufficient to justify the cost. Early signs suggest the gap may be narrowing. Backlogs among major hyperscalers have surged to $1.7 trillion and are growing faster than capital expenditures, indicating that demand is building even as investment remains elevated. "While the worry has been that CapEx spend is outrunning profitability, revenues are growing," notes Jack Janasiewicz, CFA®, Portfolio Manager and Lead Portfolio Strategist at Natixis Investment Managers Solutions.
Source: Bloomberg
- Strong demand has made compute capacity, rather than customer interest, the primary constraint on AI growth.
- AI coding, enterprise AI, and inference workloads are increasingly evolving from experiments into established businesses.
- Lower forward price-to-earnings ratios could provide a cushion if semiconductor earnings growth falls short of expectations.
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