Webscale Network Operators: 1Q24 Market Review Capex surges by 25% YoY in 1Q24 as the Generative AI bubble expands and FOMO prevails

Webscale Network Operators: 1Q24 Market Review Capex surges by 25% YoY in 1Q24 as the Generative AI bubble expands and FOMO prevails

This report reviews the growth and development of the webscale network operator (WNO) (aka hyperscale) market since 2011. In the most recent 12 months (2Q23-1Q24), webscalers represented $2.42 trillion (T) in revenues (+7.6% YoY), $295 billion (B) in R&D spending (+5.5% YoY), and $204B in capex (+1.5% YoY). They had $658B of cash and short-term investments (+4.0% YoY) on the books as of March 2024, and $550B in total debt (+0.2% YoY). Webscalers employed approximately 4.161 million (M) people at the end of 1Q24, up a bit from the March 2023 total of 4.080M.

Tech spending: capex surges 25% YoY in 1Q24 as webscalers expand GenAI efforts; R&D spend remains elevated

Generative AI has captured the public’s imagination, and is covered endlessly by tech and financial journalists. There appears to be a land grab to build GenAI models as fast as possible. Webscalers have ramped up data center spending dramatically. That has directly benefited one specific chip vendor, NVIDIA, as the race to train models accelerates. Suddenly this company has a market cap just below that of Microsoft and Apple. Is any of this sustainable? Does NVIDIA have some sort of first mover advantage? Do the webscalers currently blanketing the world with AI-centric data centers have such an advantage?

Total capex for the four quarters ended 1Q24 was $204B, up 1.5%. For 1Q24 alone, capex was $56.9B, up a whopping 24.7%. Moreover, the tech piece of capex has been surging: Network/IT and software capex for webscalers was about $35.4B in 1Q24, up 53%. That is unlikely to be the norm, to be clear. Capex is volatile in the webscale sector and driven by just a few big players; the top 4 captured 78% of 1Q24 annualized tech capex. But the prospects for 2024 are strong.

Please Note: This product is delivered as a zip file with an Interactive Excel Workbook.