Catenaa, Saturday, October 17, 2026- Standard Chartered said capex growth and profit margins will determine confidence in AI investments after a week of AI-related sell-off.
“We expect Big Tech’s AI spending to remain elevated, supporting our constructive AI capex outlook. However, we await guidance on the pace of capex growth and the sustainability of profit margins,” the bank said.
Standard Chartered said chip leaders’ latest company guidance points to supply constraints extending through 2028, supporting continued compute capacity expansion.
However, it said AI capex is still likely to rise, but y/y growth is expected to moderate from 100% in Q3 2026 to 20% in Q3 2027.
“This normalization in growth could raise concerns about the AI investment cycle’s durability,” Standard Chartered said.
Standard Chartered warned that a slowdown in AI spending growth could create challenges for technology companies. Semiconductor manufacturers may see weaker revenue momentum, while major cloud providers continue to account for depreciation expenses tied to earlier infrastructure investments.
It said that the slower growth is already partially reflected in the Nasdaq-100’s valuation de-rating this year.
Despite the selloff following September’s US inflation figures, major American equity benchmarks remained relatively close to their peaks. Standard Chartered reported that the Nasdaq-100 was 4.5% below its record, while the S&P 500 had retreated less from its recent highs.
Standard Chartered found that volatility had increased but had not reached levels commonly associated with widespread investor capitulation. The VIX stood at 18.2, compared with earlier readings below 15, while the bank identified the 25–30 range as a potential indicator of more severe market stress.
“While we remain constructive on the AI investment theme, we prefer to stay prudent in the near term and await Big Tech’s guidance for greater visibility into spending plans in H2 2027 and beyond,” Standard Chartered said.
It noted that the near-term outlook reflected a less favorable risk-reward balance, as Standard Chartered turned defensive; the Nasdaq 100 index recorded its biggest weekly decline in three months after September’s hotter-than-expected US inflation report briefly lifted bond yields.
Further, Standard Chartered said its stock-bond quant model turned more negative (-2) this week, signaling elevated near-term equity volatility.
