Munster Sees 37% Hyperscaler Capex Growth in 2027

Gene Munster of Deepwater Asset Management is projecting significant growth in cloud spending for 2027, predicting that hyperscaler capex growth will reach 37% year-over-year, up from current estimates of 23%. This would be driven by strong demand for AI infrastructure and increased investments from major players like Alphabet's Google and Amazon's AWS.

Munster expects Google Cloud to outpace its competitors in the June quarter, with revenue growth projected at 70% year-over-year, surpassing the consensus estimate of 64%. Meanwhile, Amazon's AWS cloud is expected to grow 34% in the same period, beating the street consensus of 32%. Microsoft's Azure is anticipated to see smaller upside, with its year-over-year growth projected to match expectations at 40%.

Munster believes that the increased capex plans will drive AI infrastructure earnings growth, offsetting valuation compression. He also notes that investors may reward the AI trade based on the improved outlook, given the potential for significant earnings growth.