Regulatory Risk is Coming For AI | David Woo on AI Data Center CapEx and Iran War
Episode publishedPodcast: Monetary Matters with Jack Far...Monetary Matters with Jack Farley
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Today's episode is brought to you by the Tucrium Corn Fund, ticker c o r n. Let's get into it. Very pleased today to be joined by David Wu, independent economist known for his game theory based forecast on global markets and geopolitics. David, welcome to Monetary Matters.
Thanks for having me.
David, what do you think about AI, the huge CapEx in data centers that's now global, and just the AI data center trade?
For me, the big takeaway from the first quarter was the fact, by the way, the combined CapEx, okay, of the five hyperscalers, that is Microsoft, Google, Amazon, you know, whatever, Oracle and Facebook, were actually down for the first time in three years, actually on a quarter on quarter comparison. In fact, even on a year on year comparison, the growth rate dropped relative to the fourth quarter last year. And then not to mention the fact that obviously in the first quarter, these hyperscalers were paying more for whatever they were buying from Micron, Samsung, and practically everything else
So you said that there was a slowdown in actual CapEx in Q1? Yes. Quarter over quarter. Wow. One In talked about
dollar terms, there was a quarter on quarter drop. And then year on year, basically growth rate declined in Q1. Wow. This is even before we take into account of the inflation, probably we saw in Q1, which were driven down essentially the real increase, the volume increase in the actual CapEx.
So what explains that quarter over quarter decrease in CapEx from the fourth quarter of last year to the first quarter of this year? And how come no one else is talking about this?
I think people just don't look at the numbers. I mean, the main reason is Microsoft actually. Google actually increased their their CapEx a little bit. Microsoft and Facebook basically pulled back a bit, which actually makes a lot of sense to me. Actually, because Microsoft, we know that they had some issues, because in the past, they thought that they had this exclusive deal with ChatGPT, with OpenAI, right? And then they lost that. And then they've been trying to they are trying and then they saw also the adoption, corporate adoption of of, essentially, the of Microsoft Copilot offering has
Bearish gold as well.
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