AI: From Spending to Earning

AI investment continues to reshape markets, but the story is increasingly shifting from spending to earnings. We explore where that investment is translating into growth and why the ultimate winners may extend well beyond today’s AI leaders.

Few forces have shaped this year’s results more than artificial intelligence, and here too, reality has run ahead of expectations. The largest US technology companies, known as hyperscalers, spent about $150 billion on capital investment in 2023. This year, they are on track to spend about $800 billion, more than five times as much in just three years. Each year, actual spending has exceeded analysts’ forecasts at the start of the year.

That spending is a direct source of profits for the companies building AI infrastructure, including chipmakers, hardware makers, industrial firms, and utilities. Excluding one-time “other income” gains, those companies account for roughly half of S&P 500 earnings growth this year.¹ Much of every dollar a hyperscaler spends on a data center shows up as revenue for another company in the index.

The natural question is, what happens if the spending slows or stops growing? Analysts do expect hyperscaler spending growth to decelerate in the coming years, but we see little chance of spending plateauing in the foreseeable future. Hyperscalers are expected to spend more than $1 trillion next year. To stall overall S&P 500 earnings growth next year, that spending would have to fall by nearly a third from this year’s level. That would be a sharp reversal, and nothing in companies’ current plans points to one. Even then, profits for the companies supplying the AI buildout would remain roughly 25% above 2025 levels.² The managers and companies we speak with consistently tell us that demand for AI capacity is meaningfully outpacing supply.

There are also growing signs that the spending is paying off. Cloud revenue growth at Amazon, Alphabet, Microsoft, and Oracle is expected to accelerate from +48% in the second quarter to +55% in the third, supported by large backlogs of contracted business. Nearly 30% of S&P 500 companies mentioned AI having a quantifiable impact on their latest earnings calls, up from less than 5% in early 2023.³ In our view, there is still significant room for AI adoption to expand.

Investors broadly expect AI spending to keep growing, and we share that view. Where they are more cautious is in how long today’s exceptional growth and profitability can last, and NVIDIA is a striking example. Last quarter, NVIDIA grew revenue +105% with EBITDA margins of nearly 70% and raised its outlook, yet the stock trades at about 18x forward earnings, down from 32x a year ago. That discount reflects uncertainty about how durable those results will be. Who ultimately captures the economics of AI remains an open question. Given how wide the range of outcomes still is, we think the prudent approach is to maintain broad exposure across the AI ecosystem and beyond, rather than concentrating on the few companies leading today.

Endnotes

^1,2 Goldman Sachs Global Investment Research, “US Equity Views: Over-earning, but not an earnings bubble,” September 17, 2026.

^3,4 Sourced from a16z State of the Markets September 2026. AlphaWise and Morgan Stanley Research, July 27, 2026. “AI adopters” are companies identified by Morgan Stanley Research analysts. Companies reporting multiple quantifiable benefits from artificial intelligence are counted only once. The analysis is based on company disclosures and may not capture benefits that have not been publicly quantified.

⁵ FactSet and Goldman Sachs Global Investment Research. Hyperscaler capital-spending growth represents consensus estimates for Amazon, Alphabet, Meta, Microsoft, and Oracle.

⁶ Goldman Sachs Global Investment Research. Cloud revenue growth represents the aggregate year-over-year growth of Amazon, Alphabet, Microsoft, and Oracle cloud businesses. Q3 and Q4 2026 figures are Goldman Sachs estimates.

Explore additional insights and perspectives to help you navigate the complexities of wealth.

Macro & Markets Update: Q3 2026

Mid-Term Election Update: A Blue Wave

Should I Start a Single-Family Office? Why the Math Usually Doesn’t Work

Macro & Markets Update: Q2 2026

A Look Into Today’s IPO Environment

Important Disclosures
The views expressed in this document, and the description of data supporting these views, are those of SCS Financial Services (together with its affiliates, “SCS”). The materials contained herein do not constitute an offer to sell or a solicitation of an offer to buy any security. Any such offering or solicitation can be made only by means of delivery of a definitive Confidential Private Placement Memorandum (“Offering Memorandum”) which sets forth in detail the terms and conditions of the offering and the applicable risk factors and should be reviewed in its entirety prior to investing. Securities may not be offered, sold or delivered to any prospective investor who does not satisfy certain minimum financial and sophistication criteria, or in any jurisdiction in which such offer is not authorized. SCS does not provide tax, accounting or legal advice and prospective investors should consult their professional advisers as to the tax or legal consequences of any potential investment.

The information in this document is as of the date indicated and is subject to change without notice. In preparing this document, SCS has relied upon certain information provided by third parties without independent verification of the accuracy or completeness of such information and SCS accepts no liability for any direct or consequential losses arising from its use. The information contained herein is confidential, is intended only for the use of the individual or entity to which it is addressed and may contain information that is proprietary, constitutes a trade secret and/or is subject to copyright. By receipt of this document, the recipient agrees that it will not distribute this document, in whole or in part, to others, except to the recipient’s professional advisers for purposes of advising the recipient, without the prior written consent of SCS.

Forward Looking Statements
Certain statements contained in this document may be forward-looking statements. By their nature, forward-looking statements involve a number of risks, uncertainties and assumptions that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. Forward-looking statements that reference past trends or activities should not be taken as a representation that such trends or activities will necessarily continue in the future. Any economic or market forecast presented herein reflects the judgment of SCS as of the date of this material and is subject to change.

Risks
All investments risk loss of capital and there is no guarantee that an investment will achieve its investment objective. Private Fund investments in particular involve significant risks and are intended for experienced and sophisticated investors. Some of the risks associated with an investment in Private Funds include: (i) use of leverage or other speculative investment practices, (ii) illiquidity of investments including restrictions on transfers, (iii) potential multiple layers of fees and expenses, and (iv) lack of comprehensive regulatory regime. For a complete description of the risks associated with such investments please review the “Risk Factors” and “Conflicts of Interest” sections in the relevant Offering Memorandum.

Performance and Fees
Performance for the most recent time period presented may be based on estimated returns and is subject to change. Performance of individually managed accounts will vary based on constraints, timing, funding levels and other factors and may be lower or higher than any performance shown herein. Unless otherwise indicated, performance shown is net of fees and expenses incurred at the underlying fund or account level and includes the reinvestment of dividends and other earnings. Past performance may not be indicative of future results.

Unless otherwise indicated, performance shown is net of fees and expenses incurred at the underlying fund or account level and includes the reinvestment of dividends and other earnings. Returns will be reduced by the amount of any fees incurred in the management of an account by SCS. For example, an account charged an assumed advisory fee of 75 bps per year compounding monthly at an assumed 8% annualized rate would compound annually at 7.20% net of fees and an investment of $10,000 after a five-year period would be worth approximately $14,158 net of fees. A description of SCS’s fees is included in the most recent version of SCS’s Form ADV Part 2 which is available at https://adviserinfo.sec.gov or from your SCS advisor.

Asset Custody
In accordance with Rule 206(4)-2 under the Investment Advisers Act of 1940, as amended, we request that you compare any account information contained in this book with the account statements that you receive directly from your custodian or fund administrator.

Use of Artificial Intelligence Tools
SCS uses artificial intelligence tools to support drafting, analysis, and internal workflow efficiency; these tools are used only as supplemental resources, and all investment advice, portfolio decisions, and client communications are made solely by SCS personnel. AI tools do not make investment recommendations, and any AI-assisted content is reviewed by SCS staff before use. AI technologies are subject to limitations and may occasionally generate inaccurate or incomplete information; their use does not guarantee accuracy, performance, or error-free materials. SCS implements controls designed to comply with applicable privacy, cybersecurity, and regulatory requirements, and any use of AI tools is conducted in a manner intended to protect client information and maintain the firm’s obligations under federal securities laws.

Hypothetical Performance
Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve gains or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular investment program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of investment losses are material points which can also adversely affect actual results. There are numerous other factors related to the markets in general or to the implementation of any specific investment program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual results.

Private Investment Performance
Portfolios invested in Private Equity, Private Real Assets, Private Opportunistic Assets, or Private Credit funds display performance for these investments once each such fund has reached its respective Performance Threshold. The Performance Threshold is defined as one year from the first capital balance for SCS Managed Private Equity and Private Credit Funds, or two years from the first capital balance for SCS Managed Private Real Assets or Private Opportunistic Assets Funds, and once total capital called has reached 33% of aggregate capital commitments. Both thresholds must also be met for 3rd party-managed Private Equity, Private Real Assets, Private Opportunistic Assets, or Private Credit funds recommended by SCS. Unless otherwise noted, Private Investment performance and market values reflect capital activity through the date of this report. The most recent performance is based on best available information and is subject to change.

Capital Call Credit Line
Most Private Investment funds managed by SCS utilize a capital call line of credit to facilitate the funding of underlying investments and reduce the number of capital calls issued to investors. Performance reported for the SCS-managed Private Investment funds includes the effects of each funds’ borrowing. The reported internal rate of return (“IRR”) may be higher than the fund would have otherwise reported without the use of borrowing due to deferral of investors’ capital calls. The reported total value to paid-in capital ratio (“TVPI”) may be temporarily higher while investments are being funded without calling capital from investors and will ultimately result in a lower VPI than what would have been achieved without the expense of credit facility.

SCS Private Investment Recommendations
There can be no assurance that the Private Equity, Private Credit, Private Real Assets, or Private Opportunistic Assets funds recommended will achieve their investment objectives, be able to implement their investment strategies or be able to avoid losses. Despite each fund targeting a diversified portfolio of investments, an investment in the funds should be considered to be illiquid, speculative investments and, accordingly, are not intended to be a complete investment program and should be considered as part of a diversified investment portfolio. Investments in the funds are intended for investors who understand the strategy, risks, and terms of the funds, and do not require liquidity with respect to the investment and are able to bear the risk of the value of fund potentially going up or down. Additional information concerning the risks of investment and the definitive terms for each of the funds are contained in each fund’s Offering Memorandum.

Suggested searches