Markets Debate AI Capex Peak Amid Power Bottlenecks
Hyperscalers guided heavy 2025 outlays, while power and supply constraints stoked debate about AI capex peaking. We trimmed highest‑beta semis, rotated toward power, grid, and thermal management, and emphasized suppliers with contracted backlogs and cash discipline.
Fourth‑quarter updates underscored an extraordinary AI infrastructure build, with leading platforms keeping 2025 capex elevated. Yet interconnect queues, transformer shortages, and power procurement timelines emerged as pacing items. GPU lead times remained extended, while certain accelerator niches saw early signs of competitive pricing, prompting scrutiny of marginal ROICs.
Equity markets wrestled with diffusion: beneficiaries broadened from core chipmakers to power, cooling, and grid modernization. Some cyclical indicators softened around memory and peripherals as supply caught up. Credit rewarded cash‑generative names that could self‑fund expansion. The dispersion trade intensified as investors separated durable demand from hype‑sensitive exposure.
We reduced concentration in the highest‑beta semiconductor complex and added to utilities, grid OEMs, and thermal management providers with long backlogs and regulated or contracted returns. We preferred system integrators and specialty materials with pricing power over commoditizing components, and we used options to protect against guidance‑driven air pockets.
In client accounts, we paired equity tilts with quality credit from beneficiaries of electrification capex and kept dry powder for secondary issuance. We set milestones around datacenter interconnect approvals, capacity additions, and order book conversion, ready to re‑accelerate exposure should power constraints ease and visibility improve.
- Trimmed high‑beta semis; added power and grid plays
- Focused on backlog visibility and pricing power
- Protected against guidance air pockets with options
