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The $725B AI spending gap that could hit Indian global fund investors
AI spending hits $725B a year, but revenue trails at $50-60B. The gap, now $600-700B, could hit Indian global fund investors with concentrated US tech exposure, Ametra's CIO warns.
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Companies are spending hundreds of billions of dollars building AI infrastructure. The revenue those investments generate is a fraction of the cost, and the gap is widening.
Karan Aggarwal, co-founder and CIO at Ametra PMS, laid out the numbers. AI capital expenditure has reached roughly $725 billion a year. Current AI revenue runs between $50 billion and $60 billion. That works out to less than $1 of revenue for every $10 invested annually. And that is revenue, not profit.
The difference matters for Indian investors who hold global equity funds. Those portfolios are heavily concentrated in the US technology stocks driving the AI buildout.
Most large hyperscalers are channeling nearly all of their free cash flow into AI expansion. Some are borrowing or issuing equity to keep spending. Aggarwal said AI capex already accounts for 94% of hyperscaler free cash flow, a share he expects to rise to 157% by 2030. At that point, he said, the companies leading the AI race would become debt-laden operations burning cash on unproven growth.
Adoption is not the issue. Monetization is. Aggarwal cited an MIT NANDA study reported by Fortune that found 95% of generative AI pilots fail to reach production. On the consumer side, he pointed to NPR data showing only 3% of users pay for AI services. Sequoia Capital's estimates, he said, put the AI revenue shortfall at $125 billion in 2024 and approaching $600 billion to $700 billion now.
Aggarwal sees parallels to the internet boom of the late 1990s. "It seems very similar to the internet bubble of the early 2000s, where the internet saw widespread adoption but nearly 80% of internet firms went out of business," he said. Even the internet took nearly a decade before companies generated meaningful returns.