Scotiabank strategists highlight rising debt levels in U.S. tech as AI investments reshape earnings and balance sheets.
U.S. tech giants are set to exceed $1 trillion in capital expenditures over the next 12 months, driven by aggressive AI investments. Q2 earnings reveal a 38% year-over-year EPS growth, though Alphabet’s unrealized gains on stakes in Anthropic and SpaceX inflate the headline figure.
The shift marks a departure from the sector’s traditional asset-light model, with net debt to forward EBITDA for AI-focused firms climbing to 2x. Scotiabank notes this could introduce higher volatility but maintains a slight overweight on U.S. tech due to strong earnings beats and positive revisions.
Forward EPS revisions for tech lead the S&P 500 at +18% over three months, though strategists warn that sustained returns on AI spending will eventually be critical.