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Big Tech has spent years pouring record sums into artificial intelligence. Now veteran strategist Ed Yardeni says hitting the brakes could be bullish. <\/p>\n
“I’ve had the view that a slowing down in the AI build-out is actually a bullish story,” the Yardeni Research president told<\/a> CNBC Thursday. <\/p>\n He was explaining a striking split in Wednesday’s post-midterm rally, when the Dow surged 1,569 points, its best day in more than 18 months. Microsoft Corp. (NASDAQ:<\/a>MSFT<\/a>) gained 6.7% and Amazon.com Inc. (NASDAQ:<\/a>AMZN<\/a>) rose 6.1%, while Nvidia Corp. (NASDAQ:<\/a>NVDA<\/a>) fell 3.2% and CoreWeave Inc. (NASDAQ:<\/a>CRWV<\/a>) sank 9.9%. <\/p>\n Why Spending Less Could Mean More Cash <\/p>\n Yardeni pointed to concerns that hyperscalers and smaller cloud providers have been building data centers and buying chips too quickly, “creating a lot of havoc,” without any guarantee of adequate returns. <\/p>\n Amazon illustrates the problem. The company generated $168.3 billion in operating cash flow over the past year, yet reported<\/a> negative $42.4 billion in free cash flow as AI investment accelerated. <\/p>\n It expects approximately $220 billion in capital expenditures this year. <\/p>\n If hyperscalers slow their expansion, “their free cash flow will be less negative, maybe even turn positive,” Yardeni said. <\/p>\n Fewer new data centers would mean less cash going out the door, potentially improving returns on existing investments. <\/p>\n Political Speed Bumps <\/p>\n Texas could become a major obstacle to the AI build-out. Gina Hinojosa won the governor’s race Tuesday<\/a> after promising to halt new data-center permits until lawmakers pass regulations. <\/p>\n Texas accounts for nearly 30% of planned U.S. data-center additions in 2028, SemiAnalysis estimates<\/a>. <\/p>\n Politics isn’t the only obstacle. Yardeni also pointed to tighter financing, labor shortages and semiconductor constraints. <\/p>\n “I think these are all putting speed bumps in the AI build-out. And that’s a good thing,” he said. <\/p>\n He also welcomed the role of “bond vigilantes,” investors who demand higher returns for lending to risky borrowers, arguing that some “neo-clouds” shouldn’t be getting cheap credit. <\/p>\n But there’s a catch: Amazon, Microsoft, Alphabet and Meta still plan more than $700 billion in capital investment this year. Slower construction could also constrain future revenue if AI demand keeps growing. <\/p>\n