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SaaSMageddon – Is it the end of software as we know it?
Join our email list to be the first to see these videos every week: https://mailchi.mp/traderoutescapital/giuox24tmg
Check out our YouTube channel - https://www.youtube.com/@bensmarketchat
The US economy is humming along at a steady pace. Are we in a Goldilocks phase with further expansion on the horizon? We think so.
Data centre (DC) capex announcements by Microsoft, Alphabet and Amazon have put investors into a tailspin. Will DC owners ever make a return on this huge spend? According to Gartner, IT spend between now and 2029 will amount to $7trn worldwide of which $4trn will head toward AI capacity expansion. Other street reports suggest that half this AI capex will come from the main hyper scalers. Worse still Remaining Performance Obligations (RPOs) by the big DCs have one big private company at the centre, OpenAI. So much depends on one Unicorn in the process of raising $100bn to fund its expansion. RPOs are the exposure of total yet unfulfilled contracts with customers. In other words it is a deferred revenue and a liability in the balance sheet. Of Microsoft’s $650bn of RPOs announced in their recent earnings announcement, 45% of the exposure is to OpenAI.
Will OpenAI break tech? We think it won’t. Any damage to OpenAI as a business would certainly be very disruptive to the sector BUT the momentum is too strong. The AI revolution and productivity renaissance is now unstoppable.
If AI capex woes weren’t enough to contend with, the AI impact on software companies has been catastrophic YTD. The software ETF (IGV US) is down 30% since its high in September 25 and down 25% YTD vs the Equal Weight S&P500 Index up over 6% for the same period. Investors are bailing out of the sector a pace last seen during the GFC. Is it overdone or justified? As with most issues, a bit of both in our view. Investors are kicking out the proverbial ‘baby with the bath water’ but its not all gloom. We’ll discuss why some software vendors can not only survive by thrive in the AI world.
We also discuss the revenge of the ‘old’ economy on the ‘new’. Financials, energy, commodities, Industrials & utilities have finally come out of almost a decade of hibernation! Has the rotation from ‘new’ to ‘old’ got legs? Listen to the end to find out!
Always do your own research or seek the advice of your professional financial advisor.
You can find us on LinkedIn and YouTube, Money Matters, Ben Hakham CEO at Traderoutes Capital.
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By BenJoin our email list to be the first to see these videos every week: https://mailchi.mp/traderoutescapital/giuox24tmg
Check out our YouTube channel - https://www.youtube.com/@bensmarketchat
The US economy is humming along at a steady pace. Are we in a Goldilocks phase with further expansion on the horizon? We think so.
Data centre (DC) capex announcements by Microsoft, Alphabet and Amazon have put investors into a tailspin. Will DC owners ever make a return on this huge spend? According to Gartner, IT spend between now and 2029 will amount to $7trn worldwide of which $4trn will head toward AI capacity expansion. Other street reports suggest that half this AI capex will come from the main hyper scalers. Worse still Remaining Performance Obligations (RPOs) by the big DCs have one big private company at the centre, OpenAI. So much depends on one Unicorn in the process of raising $100bn to fund its expansion. RPOs are the exposure of total yet unfulfilled contracts with customers. In other words it is a deferred revenue and a liability in the balance sheet. Of Microsoft’s $650bn of RPOs announced in their recent earnings announcement, 45% of the exposure is to OpenAI.
Will OpenAI break tech? We think it won’t. Any damage to OpenAI as a business would certainly be very disruptive to the sector BUT the momentum is too strong. The AI revolution and productivity renaissance is now unstoppable.
If AI capex woes weren’t enough to contend with, the AI impact on software companies has been catastrophic YTD. The software ETF (IGV US) is down 30% since its high in September 25 and down 25% YTD vs the Equal Weight S&P500 Index up over 6% for the same period. Investors are bailing out of the sector a pace last seen during the GFC. Is it overdone or justified? As with most issues, a bit of both in our view. Investors are kicking out the proverbial ‘baby with the bath water’ but its not all gloom. We’ll discuss why some software vendors can not only survive by thrive in the AI world.
We also discuss the revenge of the ‘old’ economy on the ‘new’. Financials, energy, commodities, Industrials & utilities have finally come out of almost a decade of hibernation! Has the rotation from ‘new’ to ‘old’ got legs? Listen to the end to find out!
Always do your own research or seek the advice of your professional financial advisor.
You can find us on LinkedIn and YouTube, Money Matters, Ben Hakham CEO at Traderoutes Capital.