20240520-BofA Securities-US Semiconductors：Cloud Capex CY24 now tracking up 38 YoY， capex intensity
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US Semiconductors
Cloud Capex: CY24 now tracking up 38%
YoY,
capex intensity rising
Industry Overview
CY24 cloud capex now tracking
up 38%, 1200bps better
Data center
remains a key bright spot in semis, with all four major US hyperscalers
(
Amazon, Microsoft, Alphabet, Meta) suggesting strong double-digit YoY capex growths
this year
. Post Q1 earnings, our consensus tracker now indicates CY24 global/US-only
hyperscale capex at $
225bn/$211bn (vs. $205bn/$191bn prior), up 38%/37% YoY and
1
200bps higher than the Apr ’24 report. AI semis (supply side) continue to
sound strong,
with the upcoming NVDA Blackwell architecture later this year expected to drive greater
efficiency in compute,
though we place equal if not greater weight on (demand-side) AI
monetization progress (
AI PCs/phones– see report, genAI-related sales, GPT-4o traction,
number of Copilot subscribers, video/reels user engagement
, etc.) and related capex
commentary.
For instance, capex intensity is now tracking at an all-time high 13.5% for
CY24, up +290bps since 2020, and putting
even more emphasis/pressure on AI
monetization.
Top 5 US semi picks exposed to AI: NVDA, AVGO, MU, MRVL, AMD.
Key Q1
/Q2 and CY24 capex metrics
(
1) Q1 cloud capex reached ~$49bn, up +29% YoY, led by Google/Microsoft (+91%/+66
%
YoY);
(2) Q2 cloud capex consensus now pointing to $57bn, up +17% QoQ (+54% YoY);
(3)
CY24 global capex cons. now projected to reach a record $225bn (vs. $205bn prior),
with all US hyperscalers up at least +
20% YoY (Google >50% YoY, Microsoft/Meta/
Oracle
nearly +40%). Data center semis inventor
ies continue to improve, and we expect
cloud capex to increase sequentially throughout CY24E.
Meanwhile, we highlight China
remains a fraction of global spending, contributing only 5
-7% of global hyperscale capex.
Capex intensity at all
-time high 13.5%, still room to grow
Similarly, hyperscale capex intensity (capex as % of sales) is also expected to reach a
record 1
3.5% this year. While a big step up (+290bps YoY) off a low 2023 base, we note
this
also represents the same +290bps increase over the last four years (2020-2024)
despite
full scale AI investments taking off since, vs. US carrier capex intensity
increasing +450bps (12.3% to 16.8%) during the three years of strong 5G infra ramp
(2019
-2022). Moreover, consensus outlook for CY25/26 suggest capex intensity
declining over the next two years to just 12.8%, up only a modest +220bps since 2020
despite enterprises and sovereigns expected to ramp up spending over time
. Cloud
currently
represents nearly 50% of global $260bn data center (per Gartner) spending fo
r
CY24E
assuming 55-60% of the $225bn cloud capex is spent on server/equipment.
CY25/26 consensus could still be conservative
C
onsensus CY25/CY26E hyperscale capex now point to $247bn (up +10% YoY) and
$264bn (up +7% YoY), vs. $222bn/$249bn prior.
Though off a strong CY24E (up +38%
YoY), we continue to highlight historical capex upcycles have typically supported three
years of >15% YoY growth (last trough in CY23), and quickly decelerating growths in
CY25/26E could prove conservative. Current CY23
-26E cons. points to just +17% CAGR
for global capex, vs. +24% CAGR
between CY13-23 and +30% CAGR between CY12-22.
20 May 2024
Equity
United States
Semiconductors
Vivek Arya
Research Analyst
BofAS
+1 646 855 1755
vivek.arya@bofa.com
Duksan Jang
Research Analyst
BofAS
+1 646 556 4825
duksan.jang@bofa.com
Lauren Guy
Research Analyst
BofAS
+1 646 855 4273
lauren.guy2@bofa.com
Glossary
:
AI: Artificial Intelligence
AMD: Advanced Micro
Devices
ARM: Arm Holdings
ASIC: Application
-Specific Integrated
Circuit
AVGO: Broadcom
COHR: Coherent
CRDO: Credo
GPU: Graphics Processor
Unit
HBM: High Bandwidth Memory
IaaS: Infrastructure as a Service
INTC: Intel
LITE: Lumentum
MRVL: Marvell
MTSI: M
/A-Com
MU: Micron
NVDA: Nvidia
n
-t: near-term
TAM: Total Addressable Market
TSMC: Taiwan Semi
conductor
Manufacturing Company
XPU: X Processing Unit
Accessible version
2
US Semiconductors
| 20 May 2024
Cloud/Carrier Capex Overview
Exhibit 1: Summary of Cloud Capex Outlook
Consensus aggregate projections suggests capex across major cloud vendors can grow +38% YoY
CapEx ($mn)
C1Q23
C2Q23
C3Q23
C4Q23
C1Q24
C2Q24E
C3Q24E
C4Q24E
2020
2021
2022
2023
2024E
2025E
2026E
Total US
36,573
35,415
38,308
44,087
45,963
53,560
54,219
57,662
96,964
130,654
157,932
154,383
211,404
232,154
247,179
Google
6,289
6,888
8,055
11,019
12,012
12,181
12,280
12,569
22,281
24,640
31,485
32,251
49,042
52,190
54,637
Microsoft
6,607
8,943
9,917
9,735
10,952
13,061
12,980
13,358
17,592
23,216
24,768
35,202
50,351
57,430
59,260
Amazon
14,207
11,455
12,479
14,588
14,925
15,759
16,331
17,709
40,141
61,053
63,645
52,729
64,724
69,745
75,870
Meta
6,842
6,216
6,543
7,665
6,400
9,358
10,283
11,610
15,115
18,627
31,356
27,266
37,651
42,825
47,300
Oracle
2,628
1,913
1,314
1,080
1,674
3,202
2,345
2,415
1,835
3,118
6,678
6,935
9,636
9,964
10,112
Total China
1,197
1,746
2,145
3,703
2,798
3,478
3,773
3,840
11,237
12,918
9,410
8,791
13,889
14,779
16,488
Alibaba
366
828
564
1,365
1,352
2,217
2,302
1,744
5,575
6,030
5,490
3,123
7,615
8,155
9,222
Tencent
642
545
1,097
1,823
1,122
930
1,089
1,638
4,912
5,196
2,703
4,107
4,779
5,075
5,591
Baidu
189
373
484
515
324
331
383
458
750
1,693
1,217
1,561
1,496
1,548
1,675
Total
37,770
37,161
40,453
47,790
48,761
57,038
57,993
61,502
108,201
143,572
167,342
163,174
225,293
246,933
263,667
YoY %
Total US
(0.1%)
(7.8%)
(6.6%)
5.3%
25.7%
51.2%
41.5%
30.8%
35.0%
34.7%
20.9%
(2.2%)
36.9%
9.8%
6.5%
Google
(35.7%)
0.9%
10.7%
45.1%
91.0%
76.8%
52.4%
14.1%
(5.4%)
10.6%
27.8%
2.4%
52.1%
6.4%
4.7%
Microsoft
23.7%
30.2%
57.8%
55.2%
65.8%
46.0%
30.9%
37.2%
29.9%
32.0%
6.7%
42.1%
43.0%
14.1%
3.2%
Amazon
(5.0%)
(27.1%)
(23.8%)
(12.1%)
5.1%
37.6%
30.9%
21.4%
138.1%
52.1%
4.2%
(17.2%)
22.7%
7.8%
8.8%
Meta
25.7%
(17.9%)
(30.1%)
(14.7%)
(6.5%)
50.5%
57.2%
51.5%
0.1%
23.2%
68.3%
(13.0%)
38.1%
13.7%
10.4%
Oracle
138.7%
34.4%
(23.6%)
(55.6%)
(36.3%)
67.4%
78.5%
123.6%
(33.8%)
69.9%
114.2%
3.8%
38.9%
3.4%
1.5%
Total China
(58.2%)
(28.0%)
(1.7%)
91.0%
133.8%
99.2%
75.9%
3.7%
28.6%
15.0%
(27.2%)
(6.6%)
58.0%
6.4%
11.6%
Alibaba
(74.8%)
(50.1%)
(63.4%)
62.6%
269.5%
167.7%
308.0%
27.8%
23.1%
8.2%
(9.0%)
(43.1%)
143.8%
7.1%
13.1%
Tencent
(41.6%)
21.1%
228.4%
122.5%
74.7%
70.7%
(0.7%)
(10.1%)
50.2%
5.8%
(48.0%)
51.9%
16.4%
6.2%
10.2%
Baidu
(39.6%)
17.7%
57.1%
84.4%
71.9%
(11.2%)
(21.0%)
(11.2%)
(20.0%)
125.5%
(28.1%)
28.3%
(4.2%)
3.5%
8.2%
Total
(4.3%)
(9.0%)
(6.3%)
9.1%
29.1%
53.5%
43.4%
28.7%
34.3%
32.7%
16.6%
(2.5%)
38.1%
9.6%
6.8%
Cap. intensity (%)
Total US
12.6%
11.4%
11.9%
11.9%
13.7%
15.9%
15.5%
14.5%
11.4%
12.2%
13.6%
11.9%
14.9%
14.7%
14.0%
Google
9.0%
9.2%
10.5%
12.8%
14.9%
17.3%
16.9%
15.6%
12.2%
9.6%
11.1%
10.5%
16.1%
15.7%
14.6%
Microsoft
12.5%
15.9%
17.5%
15.7%
17.7%
20.2%
19.9%
19.0%
11.5%
12.6%
12.1%
15.5%
19.2%
19.4%
17.4%
Amazon
11.2%
8.5%
8.7%
8.6%
10.4%
10.6%
10.3%
9.4%
10.4%
13.0%
12.4%
9.2%
10.1%
9.9%
9.6%
Meta
23.9%
19.4%
19.2%
19.1%
17.6%
24.5%
26.3%
25.7%
17.6%
15.8%
26.9%
20.2%
23.7%
23.8%
23.5%
Oracle
21.2%
13.8%
10.6%
8.3%
12.6%
22.0%
17.5%
17.2%
4.7%
7.5%
14.5%
13.4%
17.4%
16.5%
15.4%
Total China
2.1%
2.9%
3.8%
5.9%
4.9%
5.6%
6.1%
5.6%
6.3%
5.8%
4.2%
3.7%
5.6%
5.4%
5.6%
Alibaba
1.2%
2.5%
1.8%
3.8%
4.4%
6.4%
6.8%
4.4%
5.9%
5.0%
4.4%
2.4%
5.5%
5.4%
5.7%
Tencent
2.9%
2.6%
5.1%
8.5%
5.1%
4.1%
4.6%
6.8%
7.2%
6.2%
3.3%
4.8%
5.2%
5.0%
5.1%
Baidu
4.1%
7.7%
10.2%
10.6%
7.4%
6.8%
7.6%
8.7%
4.8%
9.3%
6.9%
8.2%
7.7%
7.3%
7.3%
Total
10.9%
10.0%
10.6%
11.0%
12.4%
14.3%
14.1%
13.2%
10.6%
11.1%
12.1%
10.6%
13.5%
13.4%
12.8%
Source:
BofA Global Research estimates, Bloomberg
BofA GLOBAL RESEARCH
Exhibit 2: Summary of US Carrier Capex
US carrier capex intensity increased to 16.8% at the height of 5G investment cycle
US Carrier
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024E
2025E
2026E
CapEx ($mn)
36,778
37,306
37,945
41,622
42,941
42,514
44,169
44,034
43,450
43,965
44,901
52,190
56,503
46,421
44,504
45,133
45,672
Verizon
16,458
16,244
16,175
16,604
17,191
17,775
17,059
17,247
16,658
17,939
18,192
20,286
23,087
18,767
17,296
17,310
17,478
AT&T
19,530
20,110
19,465
20,944
21,433
20,015
22,408
21,550
21,251
19,635
15,675
19,578
19,446
17,853
18,181
18,296
18,341
T-Mobile
790
952
2,305
4,074
4,317
4,724
4,702
5,237
5,541
6,391
11,034
12,326
13,970
9,801
9,028
9,527
9,853
Cap. intensity (%)
15.8%
15.4%
14.6%
15.2%
14.9%
13.7%
13.5%
13.5%
12.6%
12.3%
12.2%
14.7%
16.8%
13.9%
13.2%
13.2%
13.1%
Verizon
15.8%
14.7%
14.0%
13.8%
13.5%
13.5%
13.5%
13.7%
12.7%
13.6%
14.2%
15.2%
16.9%
14.0%
12.8%
12.7%
12.7%
AT&T
15.7%
15.9%
15.3%
16.3%
16.2%
13.6%
13.7%
13.4%
12.4%
10.8%
9.1%
13.8%
16.1%
14.6%
14.9%
14.8%
14.7%
T-Mobile
19.4%
19.6%
14.4%
16.7%
14.6%
14.7%
12.5%
12.9%
12.8%
14.2%
16.1%
15.4%
17.6%
12.5%
11.3%
11.5%
11.5%
Source:
BofA Global Research estimates, Bloomberg
BofA GLOBAL RESEARCH
1Z1UrQnPpPmRtPtMrNvNsP9PdN7NmOmMsQqMiNmMsPlOpNtRaQoPpRvPnPtNMYpNpP
US Semiconductors |
20 May 2024
3
Global Data Center Spending Breakdown
Of the $5tn+ global IT spending today, we believe devices make up of ~$700bn,
software ~$1bn, IT services $1.5bn, and communications services ~$1.5bn.
Data center systems represent ~5% of the total, or $260bn. By CY28E, we believe this
could grow to ~$360bn, or at a +9% CAGR, generally in line with the overall IT spending
growth (which includes the fast-growing software and infrastructure (IaaS) services) but
faster than both hardware end devices and communications services.
Exhibit 3: IT Spending Outlook by Segment
Data Center spend should grow to ~$360bn by CY28E from $260bn in CY24, at +9% CAGR
IT Spending by Segment ($bn)
2022
2023
2024E
2025E
2026E
2027E
2028E
CAGR
'23-28E
Data Center Systems
$227
$236
$260
$287
$312
$337
$359
8.7%
Servers
$130
$134
$151
$168
$184
$199
$212
9.6%
External Controller-Based Storage
$30
$27
$27
$29
$31
$33
$35
5.1%
Enterprise Network Equipment
$67
$75
$82
$90
$98
$105
$111
8.3%
Devices
$730
$664
$688
$751
$788
$833
$875
5.7%
Software
$812
$915
$1,042
$1,195
$1,361
$1,545
$1,749
13.8%
IT Services
$1,306
$1,385
$1,520
$1,707
$1,901
$2,095
$2,283
10.5%
Communications Services
$1,439
$1,487
$1,551
$1,629
$1,697
$1,759
$1,814
4.1%
All IT
$4,515
$4,687
$5,061
$5,569
$6,060
$6,569
$7,080
8.6%
Source:
BofA Global Research estimates, Gartner
BofA GLOBAL RESEARCH
Cloud providers server spending
For cloud providers specifically, top four US vendors have begun greatly increasing
spending on data centers and broader equipment assets, reaching 55% of total spending
in 2023, up 600bps+ YoY as investments in AI kickstarted. We expect this number to
continue to increase over time, as we are still at the beginning (Year 2) of AI
infrastructure deployment, and AI monetization/inference has not even started yet.
Exhibit 4: US hyperscaler server spending vs. total spending
Server spend as a % of total spend has greatly increased past few years
Server/Equipment spend ($bn)
FY19
FY20
FY21
FY22
FY23
GOOG
Info tech assets
$6.7
$9.1
$9.7
$10.7
$14.3
Total
$21.7
$22.3
$20.6
$24.7
$30.1
Server/Equipment spend (%)
31%
41%
47%
43%
48%
MSFT
Computer eq. and software
$6.2
$7.7
$9.7
$9.4
$14.3
Total
$13.1
$15.5
$23.7
$23.0
$29.8
Server/Equipment spend (%)
47%
50%
41%
41%
48%
AMZN
Equipment
$16.7
$25.9
$31.5
$28.8
$27.6
Total
$23.9
$53.9
$65.3
$44.9
$40.6
Server/Equipment spend (%)
70%
48%
48%
64%
68%
META
Servers and network assets
$4.0
$3.5
$5.0
$8.7
$12.5
Total
$14.4
$15.1
$16.8
$26.6
$25.2
Server/Equipment spend (%)
28%
23%
30%
33%
50%
Total
Server/Equipment spend (%)
46.0%
43.3%
44.2%
48.3%
54.7%
Source:
BofA Global Research, company data
BofA GLOBAL RESEARCH
Exhibit 5: US hyperscaler server spending vs. total spending (chart)
Server spend as a % of total spend has reached ~50% or above
Source:
BofA Global Research, company data
BofA GLOBAL RESEARCH
Semis content breakdown
Of the $260bn in data center system spending (Exhibit 3) today, semis represent
$120bn of the TAM (core semis excluding memory $82bn), per Marvell.
Of the $120bn semis TAM, we believe accelerated compute (GPUs, XPUs, ASICs, etc.)
represents $87bn (inclusive of system) and should grow the fastest at a 28% CAGR to
$180bn by CY27E, with networking (interconnect/switching) representing ~$21bn
today, growing to $36bn by CY27E (+19% CAGR).
0%
30%
60%
90%
$0.0
$10.0
$20.0
$30.0
$40.0
FY19 FY20 FY21 FY22 FY23
GOOG MSFT AMZN META
GOOG (%) MSFT (%) AMZN (%) META (%)
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