The rush to buy artificial intelligence (AI) computing power is changing the business models of U.S. technology giants and creating new risks
The rush to buy artificial intelligence (AI) computing power is changing the business models of U.S. technology giants and creating new risks. Considering how much cash flow Google parent Alphabet generates from its various businesses, investors were surprised that its cash flow turned negative in the second quarter. All of this makes historical valuation measures less relevant, said Brad Warden, senior senior portfolio manager at Nomura Asset Management. Funds it manages hold shares of Nvidia, Alphabet, Microsoft and Amazon. "They look cheap now, but when you look ahead to potential disruption, they are guilty until proven innocent. Are the current business models sustainable? Will the economics get worse?" said Warden, who still expects AI spenders to eventually see a return on their investment. “It essentially comes down to how much pain you are willing to endure during an investment cycle and how firmly you believe you will ultimately reap the financial benefits on the other side of the cycle.”