By Moz Farooque ACCA
Publication Date: 2025-11-18 18:44:00
This article first appeared on GuruFocus.
Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT) both got knocked down a notch on Tuesday after Redburn at Rothschild and Co. cut its ratings on the two cloud giants to Neutral. The firm’s main worry is pretty simple: the enormous amounts of money being pumped into AI infrastructure right now aren’t generating the kinds of returns investors might hope for. Analyst Alex Haissl said that Gen-AI margins look okay on the surface, but once you dig into the details, the economics don’t resemble the early days of cloud 1.0 the way many assume.
Haissl noted that today’s AI hardware is already being depreciated over five to six years, compared with the roughly three-year windows used during cloud 1.0. That alone makes the current buildout far more capital-intensive. Redburn estimates hyperscalers are getting only about $0.20 in net present value for every $1 poured into Gen-AI, versus roughly $1.40 per dollar in the cloud 1.0 era….
