102.3K
FIThe telecoms bubble is the middle child of financial crashes.
Value destruction by telco equipment overspend in the late 1990s tends to be bundled in with the tech crash, or overlooked entirely. Morgan Stanley, in its recent research about global data centre demand in the age of AI, went for the second option.
‘Calling back to the tech boom of the mid-to-late 90s, investors have been asking about the possibility that this investment cycle for data centres could be a bubble … we believe there are a few important differentiating factors about this situation. For one, there are diverse pools of capital available today, which can distribute the warehousing of credit risk, unlike in the 90s when it was concentrated on corporate balance sheets. Second, the ultra-high-quality credit profile of hyperscalers and their significant cash on hand mean less sensitivity to macro conditions. Lastly, our equity research colleagues find that the ROI of AI should already be positive this year, generating $50bn in revenues, and that this will grow to exceed $1tr/year by 2028,’ said the broker.
But where trillions won’t be spent is on power infrastructure. Morgan Stanley estimates that more than half of the new data centres will be in the US, where there’s no obvious way yet to switch them on.
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