Australia | 1:18 PM
FNArena's latest AI deep dive reflects on the acceleration in spend, which companies are benefiting, and how AI is impacting productivity and sectors.
- The latest hyperscaler results confirmed AI-related momentum is gaining not fading
- Australia is (believe or not) at the top of AI productivity gains
- Drone technology receives an AI fillip
- Logistics and transportation in the eye of the AI storm
- LLMs have usurped search engines for data manipulation
- Technology replacement hits some macro turbulence
By Danielle Ecuyer
FNArena has dedicated a section to the modern day's technological break-through:
https://fnarena.com/index.php/tag/gen-ai/
"AI is rapidly reshaping industries globally, driving massive investment in infrastructure, accelerating productivity gains and disrupting business models, while creating both opportunities in sectors like retail, data centres and logistics, and emerging risks such as labour displacement, market competition, cybersecurity threats and unintended consequences like AI-driven manipulation."
[update provided by ChatGPT]
AI investment isn't slowing, it's accelerating
While pockets of the Twitter-sphere (sorry, X) steadfastily argue over AI technology company valuations and potential dotcom-like bubbles in infrastructure builds, chip stocks and the like, artificial intelligence is undeniably making real progress, and it is being deployed.
Look no further than the latest quarterly updates from hyperscalers in the US, which prompted Morgan Stanley to highlight the upside potential to capex spending on AI, currently totalling US$2.8trn in the US.
As we discuss in this article, the impacts are accelerating both negative and positive impulses across sectors and businesses.
PayPal and Coinbase are the two latest US companies to announce AI-related job cuts. PayPal announced it is firing one in five workers to redirect funds to AI. Coinbase has made -700 people redundant.
Anthropic’s CEO Dario Amodei declared, "I don't know what will happen to the group of today's [software-as-a-service] incumbents as a group... I think individual companies, it's very possible for them to lose market value, go bankrupt, completely."
AI disruption is no longer a question of whether it impacts companies, it’s when.
Which makes the recent AI-related comments from corporate Australia at Macquarie’s annual conference comforting the C-suite locally is on the case.
Flight Centre ((FLT)) pointed to strategic initiatives in AI and customer loyalty initiatives, while WiseTech Global ((WTC)) explained AI agents are improving the software company’s return on invested capital, with the roll-out expanding to eleven from eight countries. Further agents are planned for product release in May/June.
From an infrastructure perspective, Ventia Services Group ((VNT)) highlighted at the conference it sees major opportunities in digital infrastructure, specifically data centres. The addressable market is anticipated to expand to around $5.9bn from $2.6bn over the next five years, a compound average growth rate of around 18% annually.
Reinforcing the tidal wave of spending coming to Australia, CDC, 49.7% owned by Infratil ((IFT)), onboarded the largest data centre contract in Australia’s history at 555MW (capex guidance at -$4bn) with a US hyperscaler for 10 years, with an option to extend.
NextDC ((NXT)) post recent fund raisings has planned capex of -$3bn in FY26 and -$5bn in FY27, and another circa -$3bn in FY28.
Even credit markets have been swept up in the AI phenomenon. As highlighted by Morgan Stanley, year-to-date data centre issuance has come in at US$21bn in 1H2026, or some 20% of total supply of debt financing.
In 2025, the sector saw US$438bn of gross issuance across leveraged finance. Three hyperscalers have issued more than US$80bn of investment grade (IG) unsecured debt year-to-date and over US$100bn across all currencies.
Morgan Stanley forecasts around US$400bn of AI/adjacent issuance in IG in 2026, of which some US$250bn–US$300bn will come from hyperscalers.
Alphabet started post May Day celebrations with a EUR9bn corporate debt issuance via tranches ranging from 4 years to 37 years.
“Morgan Stanley now estimates the Big 5 hyperscalers, Amazon, Alphabet, Meta, Microsoft and Oracle, will collectively spend roughly US$800 billion on capex in 2026 before climbing toward an eye-watering US$1.1 trillion in 2027.
"Andrew Sheets framed it perfectly. Next year’s spend is nearly double the 2025 levels and triple what was spent in 2024. That is not a normal investment cycle. That is the digital equivalent of rebuilding the interstate highway system while the economy is still driving on it.”
[Quote from Stephen Inness, SPI Asset Management.]
AI productivity impacts in the global workforce
As highlighted in previous AI sector updates at FNArena, the scale and enormity of the infrastructure build-out in financial terms often boggles the mind, which begs the question: are companies starting to see benefits of using AI in the workplace?
Taking a deeper dive into productivity and AI use, Morgan Stanley established a positive correlation between industry-level AI exposure and faster labour productivity growth.
The broker reportedly estimates industries with high AI exposure generated 1.7 percentage points of the 2.4 percentage points growth in output per employee in the four quarters through to the December 2025 quarter, against a 0.7 percentage point contribution in 2024.
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