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2025.03.27 05:26

Is the AI computing power really a bubble? In-depth interpretation of TD Cowen's report

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$NVIDIA(NVDA.US) On March 26, NVIDIA's stock price fell more than 5%, triggered by a report from TD Cowen revealing that $Microsoft(MSFT.US) abandoned new data center projects in the U.S. and Europe. The planned scale of these projects was to consume 2 gigawatts of electricity, but due to an oversupply of computer clusters supporting AI operations, Microsoft canceled some of its new business with OpenAI.

The impact of the report goes without saying. Currently, market panic is high, but as long-term investors, we should rationally evaluate the report's content:

Core Ideas

  • Data center demand is growing year-over-year, but Microsoft's lease cancellations and delays create opportunities for Google and Meta to fill the capacity.
  • The redesign of hyperscale data centers has slowed equipment procurement, leading to a negative outlook for Vertiv's order volume in the first half of 2025.
  • Microsoft and Amazon are undergoing liquid cooling retrofits to support higher rack density and inference demand.

Industry Demand Shifts

1. Microsoft's Demand Decline

Due to capital expenditure adjustments, MSFT's procurement demand for data centers has slowed. This may impact parts of the supply chain, such as server components and data center infrastructure suppliers.

2. AI Computing Demand Growth

$Alphabet - C(GOOG.US) and $Meta Platforms(META.US) continue to increase AI investments, driving data center demand. AI training and inference tasks have surged the demand for high-performance computing (HPC) and GPU servers.

3. Capital Expenditure Reallocation

Major cloud computing companies are reassessing capital expenditures, with MSFT slowing down but META and GOOG ramping up investments. Supply chain companies need to readjust to the varying demand rhythms of different clients.

The chart above shows the data center capital expenditure trends of Microsoft, Google, and Meta from 2022 to 2025. It reveals that Microsoft's capital expenditure declined in 2024 and is expected to continue decreasing in 2025. Google's spending is steadily growing and is projected to exceed $40B in 2025. Meta also shows an upward trend, indicating increased AI and data center investments.

3. Impact of Industry Demand Shifts

The chart above illustrates the growth trend of AI computing demand from 2022 to 2025 (indexed, with 2022 as the baseline 100). It shows:

1. AI computing demand is growing exponentially, expected to reach 3.5 times the 2022 level by 2025. This growth is primarily driven by increased demand for deep learning, generative AI, and LLMs (large language models).

2. Market demand for GPUs and AI-specific chips (such as NVIDIA, AMD, and Google TPUs) has surged accordingly.

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