AI spending is entering a new phase! Jefferies' latest analysis: storage giants taking pricing power from cloud giants.

Jefferies Financial Group Inc. released its latest research report, pointing out that investors' attention in the artificial intelligence (AI) sector is shifting from large-scale cloud platform companies to upstream suppliers providing core components for the AI industry. Analyst Christopher Wood of the firm stated in the latest issue of the "Greed and Fear" market analysis report that the investment frenzy in the AI field for the past few years has entered a new stage, with storage chip manufacturers replacing chip designers and cloud platforms as the core entities determining pricing. With the significant increase in high-end storage chip contract prices at the end of last year, leading storage manufacturers such as SK Hynix and Micron have seen significant growth in performance and stock prices. In the report released on January 22 by Jefferies Financial Group Inc., it was mentioned that although there are signs of weakness in overall investment in non-AI fields, capital spending related to AI continues to rise. Official US data shows that spending in the AI-related software, equipment, and data center sectors saw double-digit growth last year, while investments in other types of companies declined. The market is already beginning to price in the expectation of a comprehensive recovery in the industrial and energy sectors, but macroeconomic data has not yet fully supported this expectation. The report also points out that there is a clear differentiation in the performance of global stock markets. Since the end of October last year, the stock prices of leading large-scale cloud companies and AI platform companies have been lagging, while the stock prices of storage chip manufacturers and semiconductor manufacturers have seen significant increases. Jefferies Financial Group Inc. estimates that storage chip prices rose by about 50% in the last quarter, further consolidating the dominant position of storage manufacturers in the AI supply chain. However, this dominance comes with rising costs. Currently, new semiconductor fabrication plants require investments of hundreds of billions of dollars, and Jefferies Financial Group Inc. stated that some storage chip manufacturers are pushing customers to share these costs in exchange for stable supply guarantees. This marks a significant shift in market focus, as previously there were concerns that large chip buyers would squeeze profit margins. Despite the ongoing infrastructure development in the AI industry, Jefferies Financial Group Inc. warns that the capital spending cycle in the AI field has moved beyond its initial stage. The report compares the current market environment with other capital-intensive industries, noting that the return on investment in such industries tends to gradually return to normal over time, and the current core risk is whether investors will begin to question whether the significant investment in AI can generate enough profits to match its scale. This concern has already shown signs in the capital markets: in recent months, despite the further expansion of capital spending plans by leading cloud companies and internet enterprises until 2026, their stock prices have fallen, while the stock prices of chip and storage manufacturers have continued to rise. Jefferies Financial Group Inc. estimates that capital spending by large-scale cloud companies will continue to significantly increase this year, putting them under greater pressure for performance returns. The report also warns that the surging energy demand is becoming a structural issue accompanying the development of the AI industry. Several technology companies have begun to directly invest in energy supply security, signaling that the industry is gradually transitioning to a heavy asset business model. Overall, Jefferies Financial Group Inc. assesses that the investment logic in the AI sector has not been overturned, but there has been a change in the core beneficiaries within the industry. In the short term, storage chip manufacturers are the biggest winners; however, for companies that have invested heavily in AI infrastructure but have no clear evidence of profitability, investors' attitudes are becoming increasingly cautious and discerning.