The winners set to cash in on $US1.6 trillion artificial intelligence investment spending spree in 2027
Spending on AI infrastructure is expected to reach $US1.6 trillion next year. This creates major opportunities for chipmakers and power companies, but rising borrowing costs are creating risks for neocloud companies that rely on debt to grow.
Australians lack confidence in using AI technology
Global shares in companies linked to record AI investment rose again on Monday after falling for a week. The earlier losses followed the failed stock market listing of Australian data centre company Firmus Technologies.
Big changes in the value of AI-related companies have affected stock market returns throughout the year. Investors are trying to work out which companies will benefit most in 2027.
Research from Morgan Stanley suggests that $US1.6 trillion ($2.3 trillion) will be spent on AI infrastructure in 2027. Some of the biggest investors will be huge technology companies, including Meta, Google, Microsoft and Amazon, which run large computing systems known as hyperscalers.
Other companies involved in AI data centres, computer hardware and power supplies are also competing to win a share of the expected $US1.6 trillion spending in a single year.
Tomorrow's winners
Morgan Stanley says the best opportunities to benefit from this spending are in computer chips, servers, networking equipment, memory and power supplies.
The bank says South Korean computer hardware makers Samsung and SK Hynix are well placed to make much higher profits through 2027. Over the past year, Samsung's shares have risen 140 per cent, while SK Hynix's shares have fallen 14.4 per cent.
“Across sectors, we see many companies growing rapidly as they win business to bring on compute for hyperscalers and neoclouds, and are thus seeing rising revenue exposure to the AI infrastructure build,” Morgan Stanley said.
The US investment bank expects spending on AI to account for 25 per cent of all sales growth among S&P 500 companies in 2027 and 78 per cent of their total profit growth.
Other companies expected to benefit include chipmakers Broadcom, AMD and Nvidia, as well as major networking equipment makers Cisco and Arista Networks.
Uncertainty around neoclouds
The race to make money from the AI boom has also encouraged many everyday investors to put money into companies known as neoclouds. These include the Nasdaq-listed businesses CoreWeave, Nebius and IREN.
On Monday, shares in all three companies rose by more than 3 per cent on Wall Street, but their share prices remain well down for 2026.
The small recovery came as investors set aside concerns that the companies were part of a bubble, or a period of excessive excitement that pushes prices too high. Those concerns grew after private company Firmus struggled to attract support from more experienced professional investors.
British data centre company Nscale also suffered a setback on Monday after reports that Microsoft had withdrawn from a funding deal. The decision threatens the plans of Nscale's Australian founder to list the company on Wall Street at a value of up to $US35 billion.
Morgan Stanley says neocloud companies planning to build and run data centres are among those contributing to the expected $US1.6 trillion in AI investment.
However, the bank warns that rising government bond yields around the world make profitable hyperscalers such as Microsoft and Meta safer investments than young neocloud companies. These newer businesses need to borrow money to pay for their ambitious plans.
“We continue to see capacity for the higher-rated hyperscalers to fund their investment plans, even at higher borrowing costs, while lower-rated borrowers are more exposed to financing constraints,” it said.
Winners on the ASX
Meanwhile, Macquarie Group's Equity Strategy team warned that the US Federal Reserve's decision in September to raise interest rates means forecasts for heavy spending on AI may need to be reduced.
“Markets should start pricing the risk of weaker AI capex before central banks are ready to pivot to (rate) cuts later in 2027,” Macquarie said.
“The AI build has supported global growth and inflation despite higher energy costs, rising yields and rate hikes. If marginal capacity is no longer funded, the slowdown should spread through data-centre construction, power infrastructure, equipment and commodity demand.”
Macquarie's share market experts believe Australian investors should avoid the rush into neocloud companies that rely on debt. Instead, they recommend investing in profitable businesses that could benefit when bond yields fall.
For this approach, which goes against the current rush into AI investments, Macquarie recommends buying shares in healthcare, real estate and infrastructure companies.
Companies it names include toll road operator Transurban, property group Goodman Group and private hospital operator Ramsay Healthcare.