Ben Powell, chief strategist for the Middle East and Asia Pacific at BlackRock Investment Institute, spoke at the Abu Dhabi Finance Week (ADFW) conference.
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Ben Powell, chief investment strategist for APAC at BlackRock, said the wave of capital flowing into artificial intelligence infrastructure was far from peaking, arguing that the sector’s “grab and dice” suppliers – from chipmakers to energy producers to copper wire manufacturers – remained the clearest winners as hyperscalers competed for spending against each other.
Powell told CNBC on the sidelines of Abu Dhabi Finance Week on Monday that the surge in AI-related capital spending shows no signs of slowing down as tech giants aggressively seek to gain an edge in what is seen as a winner-take-all competition.
“The flood of capital spending continues. The capital is very clear,” he said, adding that BlackRock is focused on what he calls “the traditional pick-and-drill capex superboom that feels like there’s still a long way to go.”
AI infrastructure has been one of the biggest drivers of global investment this year, driving a broad market rally even as some investors question how long the boom will last.
Nvidia, whose GPU chips are the backbone of the AI revolution, became the first company to briefly surpass $5 trillion in market capitalization during a dizzying AI-driven market rally that sparked talk of an AI bubble.
Microsoft and OpenAI also reached a restructuring agreement in October to support ChatGPT developers’ fundraising efforts. OpenAI is reportedly preparing for an initial public offering that could value the company as much as $1 trillion, according to Reuters.
The build-up kicks off a long-term procurement effort across the tech sector, from chip supply contracts to power contracts. Power grid operators from the United States to the Middle East are racing to meet surging power demand from new data centers. Companies including Amazon and Meta are budgeting tens of billions of dollars a year for AI-related investments.
S&P Global estimates that data center power demands could nearly double by 2030. This is mainly due to crypto mining sites as well as hyperscale, enterprise, and leased facilities.
“Stepping into the credit market”
Powell also noted that large tech companies are just beginning to tap the capital markets to fund the next phase of their AI expansion, suggesting additional capital is on the way.
“The big players are just starting to dip their toe into the credit market, and we feel there’s still a lot more they can do,” he said.
Powell said the “hyperscalers” are acting as if being in second place will effectively lock them out of the market. This mindset is causing companies to accelerate spending despite the risk of overshoot, he added.
Much of that money is likely to go to companies building AI rather than model developers, Powell said, supporting a growing view among global investors that the most lasting benefits from the AI boom may lie in the hardware, energy and infrastructure ecosystems behind the technology.
“If we’re in a position to take that cash flow, whether we’re making chips, whether we’re producing energy all the way down to copper interconnects, I think that’s a pretty good place to be,” Powell said, adding that he expects “positive surprises that will drive these stocks up over the next year.”
