Big tech as the new utilities
Speakers
Deirdre Bosa
— Anchor/Reporter, CNBC Tech Check
Summary
Deirdre Bosa argues that Big Tech is becoming the new utilities as Alphabet, Microsoft, Meta, and Amazon build an AI intelligence grid that customers will rent rather than build. She says this utility-like shift changes valuation, with multiple compression, capex crowding out buybacks, a focus shift to ROIC, and closer regulatory scrutiny. She also warns that the current cloud/AI buildout differs from the prior cycle because hyperscalers and Meta are spending ahead of demand rather than serving already-paying customers.
- Big Tech capex spending is projected at $600B this year.
- Deirdre Bosa says Big Tech is becoming the new utilities.
- AI customers will rent from Big Tech rather than build themselves.
- Utility-like shift may compress multiples and crowd out buybacks.
- Metric focus shifts from revenue growth to ROIC.
- Regulatory scrutiny may increase over critical infrastructure.
- Cloud buildout is spending ahead of demand, unlike prior cycle.
- Multiple expansion is possible but less certain this time.
Ideas
Big Tech becoming utilities compresses multiples
Big Tech (Alphabet, Microsoft, Meta, Amazon) is becoming the new utilities because companies will rent AI from them rather than build it themselves, creating an intelligence grid like electricity. This shifts the business model from asset-light to asset-heavy, compresses multiples, crowds out buybacks with capex, shifts focus from revenue growth to return on invested capital, and invites closer regulatory attention. Their far better margins than traditional utilities may soften the blow, but the direction is clear and changes what investors should pay for them.
Cloud spending ahead of demand risks multiples
The current cloud/AI buildout follows similar logic, but unlike the prior cloud cycle where customers were already lining up and paying, hyperscalers and Meta are now spending ahead of demand. Investors were rewarded with multiple expansion last time, and that could happen again, but the spending-ahead-of-demand dynamic makes the payoff less certain.
