UBS: AI Investment Delivers Outsized Multiplier Effect on US Business Spending

Goldman Sachs strategist Laura Cyr said in a Monday note that the US data center growth outlook through 2027 remains largely unchanged despite rising political and community opposition. Cyr raised Goldman's year-end 2026 US data center capacity forecast by 5 gigawatts to 64 gigawatts, while cutting its year-end 2027 forecast by 5 gigawatts to 90 gigawatts. She now expects US data center power demand to grow 38%, or 12 gigawatts, in 2026 and 38%, or 17 gigawatts, in 2027, on a December versus December basis. Cyr pointed to Governor Abbott's directive to halt new Texas data center permits pending ERCOT and Texas Water Development Board audits, and an NBC News poll showing 64% of voters would be less likely to support a candidate who backs a local data center versus 11% who would be more likely. Separately, BofA Global Research estimated that up to 75% of a data center's total water consumption happens off-site, that GPU-based server electricity demand is growing roughly 30% per year, and that every incremental megawatt of new data center capacity embeds roughly 60 to 75 tons of metals, primarily copper.

Akamai Technologies announced an approximately $11.6 billion agreement supporting Anthropic's central processing unit workloads, a deal that also provides for a potential additional $9 billion in business beyond the initial commitment. On Mad Money, Jim Cramer said the seven-year contractual commitment works out to $1.66 billion per year, more than a third of what Akamai is expected to bring in this year, though the annual figure is a simple average and Akamai's filing specifies separate seven-year project terms beginning on their respective service start dates, with payments subject to delivery and availability requirements. Akamai estimates approximately $5.5 billion in capital expenditures related to the Anthropic commitment, including an additional approximately $1.7 billion in 2026, and left its 2026 revenue guidance unchanged while issuing an Anthropic warrant covering up to approximately 5% of its outstanding common stock. In the second quarter, Akamai's cloud infrastructure services revenue rose 39% year over year to approximately $99 million and security revenue rose 10% to approximately $604 million, helping total revenue grow 5% to approximately $1.1 billion, while delivery and other cloud applications revenue declined 6% and adjusted earnings per share fell 8% to $1.59. Cramer, who highlighted Akamai's distributed Akamai Inference Cloud initiative and its edge computing approach, said the stock's retreat after the announcement felt like a buying opportunity, noting it trades at approximately 16.6x forward earnings, below Fastly's approximately 48x multiple.

Quanta Services raised its full-year 2026 free cash flow outlook to $2-$2.5 billion, alongside operating cash flow expectations of $2.9-$3.4 billion, after a strong first half. In the second quarter, Quanta generated operating cash flow of $1.10 billion and free cash flow of $886 million, bringing first-half free cash flow to $1.07 billion, sharply higher than $288 million in the comparable 2025 period. Management attributed the second-quarter strength partly to favorable working-capital dynamics, particularly from large-load and renewable projects, while days sales outstanding improved to 57 days. The outlook is underpinned by a record $53.4 billion backlog, expanding project activity and rising investment in electric grids, power generation, data centers and other mission-critical infrastructure. Quanta still expects roughly $900 million of net capital expenditures in 2026, and cash generation could fluctuate with project timing, working-capital requirements, acquisitions, weather, permitting, supply-chain issues, inflation and project execution. Quanta competes with MasTec and EMCOR Group across power, electrical and mission-critical infrastructure markets; MasTec reported negative $59 million of free cash flow in the second quarter, while EMCOR posted record remaining performance obligations of $17.14 billion.

Amazon Web Services Chief AI and Technology Officer Matt Wood said the cost of delivering a given level of AI intelligence is falling by one or two orders of magnitude every three to six months outside the most advanced frontier models, a decline he attributed to improving efficiency as companies learn to operationalize frontier models at lower cost. Speaking to CNBC on Thursday, Wood rejected the idea that more capable AI agents must become less safe, saying developers can surround models with controls, guardrails, security and privacy protections while still improving the underlying technology, and pushed back on the notion that companies must choose between development speed and safety. Wood also defended AWS's $220 billion infrastructure investment, pointing to customer demand and internal business metrics, and said he expects additional computing capacity and greater operating efficiency to bring AI to more businesses and users. Accelerating AWS growth helped push Amazon above $3 trillion in market value for the first time in August 2026, after second-quarter results showed AWS revenue growing at its fastest pace since 2021; the stock surged more than 15% in one session, adding nearly $400 billion in market value, before gaining as much as another 5.3% as it crossed the threshold. TD Cowen analyst John Blackledge said AWS's AI business exited a quarter at roughly a $25 billion annual run rate, its fifth consecutive quarter of accelerating revenue growth, and pointed to CEO Andy Jassy's view that AWS could eventually generate $1 trillion in revenue, compared with the $600 billion long-term opportunity Jassy discussed in his April shareholder letter. Amazon expects AWS to remain capacity constrained through 2026 and 2027 because of AI demand, even as it plans to double AWS capacity by the end of 2027.

Jefferies says a divided government may be the best midterm elections outcome for Big Tech players spending massive amounts of money to build out AI infrastructure. In a note on Monday, the Jefferies research team wrote that a split government and prospects for a national AI policy, rather than fragmented state-level rules, should ensure the rapid pace of AI innovation continues, disproportionately benefiting large, scaled players. The firm's biggest tech winners include Amazon, which benefits regardless of which AI model wins through a model agnostic platform approach; Alphabet, which gets more time to catch up in the AI model race with Gemini 4 Pro and beyond; Microsoft, which has the highest trust from enterprises given its pervasive presence in corporate IT shops; Oracle, emerging as the fourth enterprise cloud option with outsized upside if data center permitting and regulatory hurdles ease; CoreWeave, rapidly becoming recognized as a leading alternative to megacap hyperscalers; Snowflake, a top 2 vendor for AI data plumbing; Datadog, as observability becomes paramount; and Meta, on renewed consumer and small business momentum with Muse and Meta Business Agents. The analysts noted the president's party has lost House seats in 18 of 20 postwar midterms, and with Trump's approval near 39% and independents at 24%, they expect a GOP setback. The 2026 midterm elections are coming on Nov. 3, when voters will choose all 435 members of the House and 35 senators. Truist chief strategist Keith Lerner pointed out that every midterm election year since 1946 has been followed by positive one-year stock returns, with the biggest gain a 34% return after the 1954 elections and an average one-year gain of 14.4%.