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Thought of the day

NVIDIA shares rose 2.3% in after-hours trading on Monday after US President Donald Trump granted the chipmaker permission to ship its H200 GPUs to China in exchange for a 25% cut of the sales. Trump added that the Commerce Department is finalizing similar deals for AMD and Intel. Nasdaq futures are up 0.1% ahead of the US market open on Tuesday.

Without taking any single-name views, the move allows these chipmakers to potentially regain a key global market, clearing some policy uncertainty weighing on the semiconductor sector and the broader AI trade. Last week, a bipartisan group of US senators introduced the SAFE CHIPS Act in a bid to prevent the Trump administration from potentially easing restrictions on advanced AI chip exports to China.

But while some export controls are expected to remain in place as Washington and Beijing compete for AI leadership, we think structural drivers will likely outweigh policy risks as the transformative force of AI continues to power the equity rally.

We take stock of the rapidly shifting landscape of the AI industry over the past three years, and maintain the view that AI is a profound innovation and may prove to be one of the largest investment opportunities in human history.

The capex cycle has advanced faster than anticipated. Our current estimate of global AI capex this year stands at USD 423bn, more than 25% above our initial 2027 projections. In fact, we have said that the race to artificial general intelligence (AGI) could trigger a capex cycle where the capex of the enabling layer is dissociated from the near-term monetization potential of the application layer. Nevertheless, we believe this pattern is consistent with previous innovation cycles, and we do not see evidence of an investment bubble—key indicators, particularly those related to company fundamentals, remain reasonable compared to historical bubble peaks.

User growth and the pace of capability upgrades have exceeded expectations. The strong demand for AI products and services has supported the rising capex. ChatGPT, for example, now has over 800 million weekly active users, a fourfold increase from its substantial user base just one year ago. Adoption rates among US businesses have also jumped, according to the Ramp AI index—nearly 45% of US companies now have paid subscriptions to AI models, platforms, and tools, up from around 25% at the start of this year. Meanwhile, the outperformance of recently released AI models points to non-linear gains in capabilities, suggesting that increased compute is still translating into better model behaviors.

Evidence of monetization points to large return potential. The scaling of AI investment has made the question of return on investment (ROI) more prominent, with productivity gains being necessary to justify the level of spending. But while revenue diffusion at the application layer has lagged the rapid pace of infrastructure buildout, our estimates indicate that the AI business is already attractive not only for infrastructure manufacturers, but also further down the value chain. Additionally, a Microsoft-commissioned IDC study finds that early adopters of AI at the application layer are generating around USD 3.70 in returns for every USD 1 invested. Our conviction in the structural return on AI investment remains strong, and we have raised our estimate for the AI total addressable market to USD 3.1tr in revenue potential by 2030.

So, we continue to believe that the long-term potential of AI remains underestimated. Investors underallocated to the theme should consider diversified exposure across the AI value chain. Our strategic focus will increasingly favor the application layer, as we anticipate that companies operating within this segment will benefit most from ongoing AI-related capital expenditures.

For more details, refer to "Signal over Noise #12 – Revisiting our AI outlook: How the landscape has shifted," published on 2 December 2025.