Microsoft capex is a canary in the coal mine. Big tech is changing forever and no one has priced that in… yet. In the previous decades these companies were characterized by high cash flow and high margins since serving and creating software was relatively cheap. This is no longer the case. People are mistaken to think that AI has decreased the cost of software — it has not. Yes, you can run Claude Code to whip up code faster but the cost of the infrastructure to run Claude & similar AI models is EXPLOSIVELY HIGHER than any other piece of software in history. Proliferation of artificial intelligence means that the cost of running software is going up. Huge capex is needed, this is already true, but what people aren’t getting is that it’s not going away. These high margin software businesses Are becoming capex heavy industrial businesses that need to upgrade huge fleets of data centers every four to five years. If you don’t invest in the capex you will lose customers. You HAVE to spend it. Forget even running your own model, just making the infra to run any model cheaply & quickly is extremely valuable and an edge in the market. The financial analysts are all looking at the last 10 years of financial statements trying to use that as a guide to price the future. There isn’t anything there that hints at this level of debt, capex, and REOCCURRING EXPENSES. This is why you see mass layoffs at Amazon, Microsoft, Google because they are fighting that game. It’s partly bloat it’s also to make room for the new biggest cost which is the build out of all these data centers. That cost is only going UP, not down b/c its capex squared. ASML needs capex to feed TSMC’s capex to feed Nvidia’s capex to feed Meta’s capex. Every step here is someone else’s margin until it falls down to big tech. So I can’t believe I’m saying this but.. expect a massive repricing of all these companies 20-40% lower than where they are now. Big Tech will resemble the valuations of industrial companies from now on.