AI Spending Is Still Justified, Says Lazard

The spending is justified and the spending is going to continue to grow. AMD will be a beneficiary of that. You know, I find the chronology of earnings interesting. What do you think we learned from A&E about the future? Yeah, I mean obviously the hyperscalers earnings that we have seen so far has laid out the groundwork that all the relevant hardware, semiconductor Elliott team will tremendously benefit because we continue to see that demand cannot. You know, basically there's a supply that cannot meet the demand. So definitely really interesting to see how they are evolving that in terms of their revenue and their addressable market, they're seeing, especially for the CPU that can benefit as a core driver of the growth in the inference demand. CEO Matt Goldman was on the show yesterday, and I tried to push him on what the CapEx number for next year will be. You know, whether it will be higher in simple terms, that's on the spending side, on the growth side. Also what's driving it. And he's he was pretty clear. It's a shift to inference. You know, training load still there, but inference is now the driver. Do you see that in your research? Yeah, absolutely. Like a lot of companies are highlighting that the shift to more inference workload, especially on the back of the growth in the agent workload, has been a boon for the demand in the growth. Um, not just as I'd like to highlight that the same pattern has been seen in the other two other important hyperscalers, including Google and then Microsoft as well. I mean, it's truly impressive how these three companies have delivered combined 50% rate of growth just this quarter, which was a double the rate that we have seen just five quarters ago. Very strong validation for ROI, continued commitment to spending because they're seeing extended backlog of the customer visibility, which is a really important barometer for for the investing in AI. Uh, all three of those alphabet, Amazon, Microsoft are members of Ta tech. Y If you were going to do a scorecard from last week's earnings across the hyperscalers in the week prior, who came out on top of those three? Um, well, it's hard to pick, but I would say Microsoft and Amazon, definitely relative to the expectation this quarter was truly impressive because older three delivered something much better than expectation. That was pretty impressive in my view. And then I think people have to be comfortable and understand that by nature, this large spending commitment has to be taking place upfront. But over time, you are going to see the tangible numbers flowing through their core businesses. And this quarter was fantastic to prove their point. Selena, if there's something in aggregate across all of the companies that you track and that you include, it seems to be that demand is still running ahead of supply. Be that cloud capacity supply literal chip supply on the basis of the compute. Is that a good thing? And how long do you sort of see that lasting for. It's a great thing, but at the same time it's a balancing act. That entire supply chain has to work around to make sure. Yes, when there's a strong demand visibility, they have to make sure that they can supply all the necessary components in time so that close does not taper off. I think it's often underestimated how much amazing job this entire supply chain is doing just to make that happen. Um, if, for example, the LPA that is taking place in memory space, for example, I think it's a great example to make sure that the long trajectory for demand and the growth should be there and that there is something truly different and unprecedented as times. So let's linger on that for a second. Long term agreements in memory are atypical against history, right? What's happening? You know, based on the conversations I've had recently with with SK Group and and as well with Jensen Wong is it's the customers saying, hey, let's do a five year deal. That hasn't happened historically. Just again, what does that signal to you? Why is that noteworthy? It is noteworthy because it basically proves the point that there's extended visibility from the customer demand. And there's um. The basic pre-emptive act to make that happen so that supply and demand go hand-in-hand in balance to make that that's truly impressive. Once in a generation, growth opportunities is coming from I. We have to remember that the visibility is actually coming from the upstream. If you think of a TSMC, for example, the largest foundry in the world, I would argue that this is the company company that has the best visibility when it comes to customers. And guess what? They just announced committing to additional $100 billion in CapEx to expand in areas and in the US in conjunction with hyperscalers. I don't think they're spending money blindly. They're talking about they can actually see the demand. They can stretch out to the five years. That's why they're committing to spend today, and that's why they need to make sure all of the supply chain, including the memory companies, to just paste together to make that supply and demand coming balance.