A senior JPMorgan strategist says the buildout of artificial intelligence infrastructure is rooted in real economics, blasting bubble calls.
In a new Bloomberg interview, Stephanie Aliaga, global market strategist at JPMorgan, says the artificial intelligence infrastructure boom is underpinned by real demand and strong cash flows.
She also says that the AI trade is likely one bullish catalyst away from witnessing a resurgence.
“And what gives me some confidence when I’m performing my sanity check is that this infrastructure wave, as significant as it is, is powered by real demand growth that is already showing up in the numbers. It’s funded by real cash flows. And even after all of this enormous spending, the four major hyperscalers are still free cash flow positive. And so there’s a lot of demand and still the supply constraint on infrastructure is there.
So there’s no like house of cards underneath this AI infrastructure wave I’d say. But still I think the AI theme is a long-term one. Deep Seek was one upset that we had earlier this year. There will surely be others. And right now we’re in this kind of period of digestion. But I think we’re just waiting for that next piece of bullish commentary and data. And then we’re going to appreciate the fundamentals once more.”
Aliaga also says that bond investors are betting that the AI infrastructure buildout will generate enough revenue over time. Earlier this week, Oracle (ORCL) sold $18 billion in US investment-grade bonds with demand soaring to as high as $88 billion.
According to the JPMorgan analyst, the bond sale indicates that demand for AI infrastructure is spilling outward into other areas of finance and the real economy.
“I mean, the bargain that bond investors are making is that there will ultimately be enough revenue generated from this to pay back the bonds. That’s maybe a more conservative bet than what equity markets are making by putting more money into these leading mega caps that already have sky-high valuations.
But more broadly, I think it just shows that this infrastructure wave has a lot of urgency behind it. And it’s beginning to touch many other corners of the market. The corporate bond market is one of them. But we’re also seeing it in utilities and infrastructure and public and private and so forth.”
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