00:00This was as big as it can get in terms of, you know, a CapEx number out of the hyperscalers and probably because they went last in terms of, you know, reporting earnings.
00:10But look, I think had they not gone that big, the stock would have been up because they posted best AWS growth in the last three years.
00:20And, you know, sequentially things seem to be improving. It's just that $200 billion number and the fact that their margins are going down on the AWS side.
00:32That's why you see this kind of stock reaction. And there wasn't enough justification to, you know, ramp up CapEx by about 55 percent to $200 billion.
00:43Mandeep, how long are we going to see these massive increases in CapEx? I mean, this was for 2026 full year.
00:49I mean, are we going to see this for another two years, three years or have we, you know, is there an end in sight, I guess, is the question.
00:57So based on our work, at least so far, we feel this is the peak CapEx growth.
01:04You will still see growth, but it's not going to be of the same magnitude.
01:08I mean, 2026, we are talking about a year where CapEx from the hyperscalers will grow almost 60 percent.
01:15So and last year we had 2024 to 25 was also 70 percent growth in CapEx.
01:22So we have gone from $200 billion of hyperscale CapEx to now $650 billion.
01:28I think that growth rate will certainly come down, but there's no doubt that, you know, we are still in that part of the S-curve where, you know, there is more demand and everyone has called out supply constraints and they would have grown faster had it not been for, you know, the limited supply they had for AI infrastructure.
01:48So, Mandy, if you talk to institutional investors all around the world here that focus exclusively on technology, where are they?
01:55Has their narrative shifted about where and when and to what degree this industry should invest in AI?
02:02Has the fundamental view of AI and how this tech industry is going to get there, has that changed among some of those big, big tech investors that are big shareholders in so many of these companies?
02:12Yeah, I mean, right now you see both, you know, anxiety and some sort of panic as well in terms of, you know, the level of free cash flow that's going to get hurt because of this spend and how fast it's happening.
02:26I mean, the cloud market grew almost, you know, 20 percent plus for a decade and everyone was fine.
02:33You could see, you know, predictable free cash flows.
02:37This is a very big upfront spend.
02:40And look, it makes sense that you have to spend first to build the infrastructure.
02:46But I think you really have to take a leap of faith that all these companies that are putting, you know, $200 billion will see ROIC for their spend.
02:55And I think that's where there are question marks that some of them may not have that level of ROIC.
03:03So I think that's what's reflected in the panic so far.
03:07But there's no doubt that, you know, workflows are changing and there are some real productivity benefits you're seeing out of this spend.
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