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SemiAnalysis revises Morgan Stanley's GenAI ROIC calculations

By PulseAugur Editorial · [4 sources] ·

SemiAnalysis is critiquing a Morgan Stanley report on generative AI return on invested capital (ROIC), suggesting adjustments to capital expenditure calculations. While Morgan Stanley's report is generally bullish on GenAI ROIC, SemiAnalysis argues that the report's assumptions for IT Capex and Datacenter Capex are inaccurate. SemiAnalysis proposes alternative figures for these expenditures, which would slightly lower the projected ROIC but still indicate a strong return. AI

IMPACT Provides a more accurate financial outlook for AI infrastructure investments.

RANK_REASON The cluster consists of a critique of a financial report, not a primary announcement or release.

Read on X — SemiAnalysis →

AI-generated summary · Google Gemini · from 4 sources. How we write summaries →

SemiAnalysis revises Morgan Stanley's GenAI ROIC calculations

COVERAGE [4]

  1. X — SemiAnalysis TIER_1 English(EN) · SemiAnalysis_ ·

    Instead – we suggest that analysts go with $38/W for IT Capex but rather than use the full $14/W for Datacenter capex, instead only factoring cost for 5 out of

    Instead – we suggest that analysts go with $38/W for IT Capex but rather than use the full $14/W for Datacenter capex, instead only factoring cost for 5 out of the 15 years of useful life – so about $4.7/W for a grand total of ~$43/W. This will only drop ROIC slightly from what

  2. X — SemiAnalysis TIER_1 English(EN) · SemiAnalysis_ ·

    However – they seem to have backed into the correct answer anyway thanks to another error in figuring the invested capital! A $12.1/W NOPAT and a 31% ROIC works

    However – they seem to have backed into the correct answer anyway thanks to another error in figuring the invested capital! A $12.1/W NOPAT and a 31% ROIC works out to an invested capital of $40.3/W. However – they got there by assuming $23/W of IT Capex and about ~$16/W of

  3. X — SemiAnalysis TIER_1 English(EN) · SemiAnalysis_ ·

    While this is a good starting point and a solid framework for attacking this problem – there are a couple of areas that we think our friends at MS could fine tu

    While this is a good starting point and a solid framework for attacking this problem – there are a couple of areas that we think our friends at MS could fine tune. For starters – the analysis assumes an IT capex/W of $23B/GW – this is quite far off the mark! In the InferenceX

  4. X — SemiAnalysis TIER_1 English(EN) · SemiAnalysis_ ·

    Satya Nadella recently cited Morgan Stanley’s ROIC report as demonstrating the returns are there for Token As a Service (TaaS) businesses – a 31% ROIC for Hyper

    Satya Nadella recently cited Morgan Stanley’s ROIC report as demonstrating the returns are there for Token As a Service (TaaS) businesses – a 31% ROIC for Hyperscaler IaaS business and another 46% ROIC at the TaaS layer! (1/4) https://t.co/LOr7ZMYXpW

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