Capital expenditure

Mandeep Singh is Bloomberg's global head of technology research.

We had a lot of CapEx driven by pricing growth.

Well, guess what? Why was there pricing growth? Because of the supply-demand mismatch.

So there won't be as big of that pricing lift that companies on the semiconductor side were able to get.

And we're seeing that derating really aggressive.

But just staying on your first part with respect to the data center CapEx, we do know that data center CapEx numbers have been In 2027, 2028, there's very big numbers that are out there, 30 gigawatts for 27 and 38 for 28.

Now, the question is, we will see some of that be pushed out and delayed.

Just permitting reasons and, you know, just making sure communities are on board.

That shouldn't come as a surprise.

SK Hynix, Samsung.

Does this precipitate a recalibration on the CapEx spend if you have to adjust your expectations in terms of the demand story? Or is that being put aside for the moment? We're just moving forward on the notion that demand is not going to wane, that we will find a way through this conundrum right now.

Yeah,

Awesome.

Well, before we get to that, can I ask you a couple of questions here? One is, last time we chatted, we told you you needed to get sharper on the underwriting and account for vacancy and maintenance and CapEx and those types of things.

Did the next properties you bought follow that more strict definition of cashflow?

Yeah, they did.

And one of the things that you mentioned, Kerry, was that the bulk of the returns in the U.S. stock market over the last couple of years have come from earnings growth and not necessarily higher valuations.

Kerry also mentioned, though, the AI build out, the trillions of dollars in CapEx.

This has been a big question hanging over the market.

When will the return on investment come? It sounds like it is coming, but Alex, what are you hearing about the AI exposure that people have in their portfolios? How are they feeling about it? And what do they want to do or what can they do if they want to diversify outside of

So in talking to both of you, we've taken a little bit of a tour around the world to hear about investment opportunities and sentiment from investors and investors.

different parts of the world.

I think we can all agree that there is a constructive, long-term view on AI, some of these big numbers that we've talked about with CapEx and return on investment that is starting to become more tangible.

But if somebody's trying to think about investment opportunities outside of AI, what would be the areas that you would point them to, Alex?

STRC finally back up to par value $100 after a lot of buybacks.

There's a huge macro backdrop, stuff happening in AI, the midterms, the election results, what's going to happen to all of the industries, the AI CapEx that's being built out.

So many things to talk about.

I don't know if we'll be able to get to everything, but what the future holds is very interesting.

And what does the price of Bitcoin do? It says it's priced in, right? Like the price of Bitcoin, it hits $75,000 and rips back up to 80K.

And we see the equities all perform pretty well.

But then the AI capex stocks also not performing super well.

So a lot of volatility and uncertainty, and we're kind of seeing this really play out.

Do you need to have all 100,000 replicated in every building or should you really go with the fastest velocity items close to market? So there's all these different angles people want to understand.

What happens to my transportation expense inbound and outbound? What happens to my warehousing expense? What's the CapEx associated with the automation? Will I shrink my building footprint and go higher? And how does that impact the CapEx story? And then what if something breaks? What's the risk of me not being able to sell my products if the automation goes down? Think of an ASRS crane.

If that crane goes down, everything in that aisle is shut off from being sold.

And that's just one example of many.

And so...

You know, risk plays a big role in all this decision-making process, too.

So CapEx, interest rates, uncertainty in the marketplace, whether that be political uncertainty, whether that be, you know, interest rates not being locked and loaded for the next 12 to 24 months, or high interest rates, you know.

Yeah.

I love it because I'm about ready to go in there and buy a bunch of them.

If you think that people voting against data centers in their backyard is going to stop these companies from spending trillions of dollars on CapEx, they'll build the data center.

They already have.

They'll build the data centers in Canada.

so what i will say for the same reason oil should have been down probably two two and a half it was down eight

yeah

um i have no idea the market response today makes no sense i don't think it should be down big i don't think it should have moved big either way just because to me what this now everybody's looking at the data center thing yeah i'll tell you what i'm watching these chip stocks and ai companies getting beat up i love it because i'm about ready to go in there and buy a bunch of them If you think that people voting against data centers in their backyard is going to stop these companies from spending trillions of dollars on CapEx, they'll build the data center.

They already have.

And as you think about the amount of times that I use AI every day and what it actually takes to deliver that kind of experience to the 9 billion people worldwide, it's just going to be a massive infrastructure build out.

I mean, people are talking about trillions of dollars of CapEx that needs to be spent.

And if you think about the amount of money that went to the ground to build fiber to get internet access, it took 10 years to get internet access to the world.

But to actually deliver AI real time super intelligence to everyone, It's going to take far more invested into power, into GPUs, than I think we can ever even imagine.

And there is also this whole thing about whether we really need to be messing with this even further, right? What happens if something goes wrong? What if you're pointing it at a particular neighbourhood? What if there's concerns of whether it could be weaponised? I guess those are some of the things I thought, but obviously the one that came to me was it's another type of subscription service.

What else can we take CapEx and turn into a recurring revenue model?

Have you done this experiment where you take a magnifying glass and you point it at one spot, right? So far,

I've not