\n<\/p>\n
Financial markets question whether AI can justify heavy upfront chip spending.<\/strong><\/p>\n Doubts over whether artificial intelligence can generate enough commercial returns are weighing on leveraged neocloud providers and delaying data centre listings, according to a report by UOB Kay Hian.<\/p>\n Financial markets are reassessing whether AI can justify the heavy upfront investment in chips, data centres<\/a> and power infrastructure, the report said.<\/p>\n Whilst the spending is immediate, the scale and timing of the payoff remain uncertain. Investors are demanding clearer evidence of recurring revenues<\/a>, productivity gains and sustainable cash flows, and are scrutinising whether companies can show pricing power, profitable demand and disciplined capital allocation.<\/p>\n Neocloud providers, which rent specialised computing capacity to AI developers, have been hit hardest. The report said their capital-intensive, highly leveraged business model requires them to commit large sums to GPUs and data centres before collecting revenue.<\/p>\n This exposes them to heavy debt servicing, falling GPU rental prices, technological advances that could erode the value of their hardware, and dependence on a small number of large customers.<\/p>\n Construction delays and power constraints can also postpone expected revenues. Shares of CoreWeave and Nebius have fallen 46% and 43%, respectively, so far in the second half of 2026.<\/p>\n Established hyperscalers remain better positioned due to their diversified earnings and stronger cash flows, the report said.<\/p>\n Investors are also becoming less willing to pay premium valuations for growth that requires substantial upfront capital. Australia\u2019s Firmus withdrew its planned IPO in October, whilst Blackstone-backed AirTrunk postponed its proposed $1.92b (US$1.5b) Singapore REIT listing, reportedly targeting completion by early 2027.<\/p>\n South Korean digital infrastructure company Elice fell 32% on its first trading day on 20 October 2026.<\/p>\n Power shortages, tighter financing and environmental opposition are also slowing new data centre development, the report said.<\/p>\n This reinforces the value of operational data centres and efforts to fill vacant capacity.<\/p>\n The report added that AI\u2019s benefits remain intact, but infrastructure investment needs to be spread over a longer period.<\/p>\n<\/p><\/div>\n Financial markets question whether AI can justify heavy upfront chip spending. Doubts over whether artificial intelligence can generate enough commercial returns are weighing on leveraged…<\/p>\n","protected":false},"author":1,"featured_media":97059,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"","fifu_image_alt":"","footnotes":""},"categories":[2611],"tags":[],"class_list":["post-97058","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-buzz-headlines","wpcat-2611-id"],"_links":{"self":[{"href":"https:\/\/sgbuzz.com\/index.php?rest_route=\/wp\/v2\/posts\/97058","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/sgbuzz.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/sgbuzz.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/sgbuzz.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/sgbuzz.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=97058"}],"version-history":[{"count":0,"href":"https:\/\/sgbuzz.com\/index.php?rest_route=\/wp\/v2\/posts\/97058\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/sgbuzz.com\/index.php?rest_route=\/wp\/v2\/media\/97059"}],"wp:attachment":[{"href":"https:\/\/sgbuzz.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=97058"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/sgbuzz.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=97058"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/sgbuzz.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=97058"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\n
\n
Read Full Article At Source <\/a>
\n