AI Industry Shifts from Semiconductors to Software and Capital Markets
The AI industry is undergoing significant changes in terms of investment and market concentration. Binance investors are shifting their funds away from the semiconductor industry, where market concentration has been declining, towards software and capital markets.
As unit capacity costs continue to decline, the growth in Token usage benefits hyperscale cloud service providers, with infrastructure business profit margins reaching 33% to 38%. However, companies directly selling model capabilities are struggling to convert this growth into revenue.
The ratio of capital expenditure to operating cash flow has risen from 41% in 2023 to about 105% in 2026. This means that the funds used to expand infrastructure capacity have exceeded the cash generated by their core business, resulting in a combined free cash flow of negative $37 billion for hyperscale cloud service providers.
Debt financing has become the primary source of funding, with the proportion of debt financing in capital expenditures rising from 9% in fiscal year 2024 to 32% in mid-2026. The total debt of the five companies amounts to about $700 billion.