Chris Wood of Jefferies has raised concerns about the massive artificial intelligence spending plans of global hyperscalers. He believes the projected capex of 990 billion dollars by 2027 may not be sustainable. Earlier these companies funded investments through strong cash flows but now rising debt and negative free cash flows could create stress. Wood warns that such aggressive spending may lead to capital destruction and even a credit event if returns fail to match expectations.
Meta, Alphabet, Amazon and Microsoft are leading this investment race. Their heavy focus on AI infrastructure has created doubts about long term profitability. Investors are watching closely as the balance between innovation and financial discipline becomes critical.
India meanwhile is showing resilience in its information technology sector. Top IT firms added 6200 jobs in the first quarter. Employment at global capability centres continues to rise. Infosys is trading at thirteen times forward earnings with a dividend yield of five percent. Though valuations have de rated, they still offer value for long term investors.
Wood calls Indian IT a reverse AI trade. As global markets worry about excess spending, India’s structural growth story and steady employment provide comfort. Fund managers see Indian IT as a hedge against global AI risks.