China Securities Co., Ltd.: Capital expenditure of North American cloud vendors continues to rise sharply; focus on oversold computing power and high dividend targets.

China Securities Co., Ltd. released a research report stating that in Q2 2026, capital expenditures (CapEx) for leading cloud providers in North America will continue to see significant growth. The combined CapEx guidance for four North American cloud providers in 2026 is approximately $720 billion to $745 billion, reflecting ongoing expansions around AI infrastructure. Currently, the AI computing power supply chain remains buoyant, but the market has recently experienced significant adjustments, with signs of overselling. Moving forward, it is recommended to keep an eye on: first, the growth of annual recurring revenue (ARR) related to large models, especially in the Coding scenario. Recently, large models in North America have been subject to price cuts and promotions; if ARR growth encounters short-term bottlenecks, it may affect market expectations for future demand for computing power. Second, the implementation and development of large models in other application scenarios outside Coding. Third, the price trends of the computing power inflation chain in the near future. Fourth, the financing situation for various segments of the AI supply chain and market risk preferences. Additionally, considering the heavy holdings in the AI supply chain in Q2, coupled with recent market adjustments showing signs of a high-low cut, it is advised to focus on undervalued, high-dividend stocks. Key points from China Securities Co., Ltd. are as follows: In Q2 2026, capital expenditures for leading cloud providers in North America continued to grow significantly, with AWS, Microsoft Corporation (MSFT.US), Google (GOOGL.US), and Meta reporting quarterly CapEx of approximately $54.2 billion, $41 billion, $44.9 billion, and $31.1 billion, respectively, totaling $171.2 billion, with both quarter-on-quarter and year-on-year growth remaining strong. For the entire year, Amazon.com, Inc. has a total CapEx guidance of about $220 billion, revised up from the previous estimate of around $200 billion. Microsofts guidance is about $175 billion for the calendar year 2026; since some data center leases have transitioned from finance leases to operating leases, there has been an adjustment in disclosure criteria. Alphabets CapEx guidance is between $195 billion and $205 billion, with a median of $200 billion. Metas CapEx guidance is approximately $130 billion to $145 billion, with a median of $137.5 billion, which includes repayments of financing lease principal. For all of 2026, the four North American cloud providers' combined CapEx guidance is approximately $720 billion to $745 billion, with a median of about $732.5 billion, reflecting a significant increase from the $71 billion median guidance in Q1, indicating that North American cloud providers continue to expand around AI servers, GPU clusters, data centers, electricity, and network infrastructure, with AI infrastructure development still in full swing. In Q2 2026, revenue related to cloud and AI businesses from North American leading cloud providers continued to grow robustly, with AWS, Microsoft Corporation Intelligent Cloud, and Google Cloud achieving revenues of $42.2 billion, $39.3 billion, and $24.8 billion, respectively, which are year-on-year growth rates of approximately 37%, 32%, and 82%. The combined revenue of these three providers is approximately $106.3 billion, representing a year-on-year growth of about 43% and a quarter-on-quarter growth of about 15%. Notably, AWS's growth rate reached its highest in nearly 18 quarters, with AI-related annualized revenue exceeding $25 billion and maintaining triple-digit growth; Microsoft Corporations broader Microsoft Cloud revenue reached $59.3 billion, up 27% year-on-year, with Azure and other cloud service revenues growing by 43%. Google Cloud saw accelerated revenue growth driven by GCP, AI solutions, AI infrastructure, and TPU system sales. Meta's total revenue in Q2 was $60.8 billion, a 28% year-on-year increase, with ad revenue at $59.4 billion, representing a 27% year-on-year growth, indicating that Metas current AI investments are mainly monetized indirectly through recommendation algorithms, ad efficiency, and user engagement improvements. Overall, the revenue growth from North American cloud providers is progressively shifting from computing power leasing to model services, enterprise AI applications, and enhancing ad efficiency, and the high revenue growth serves as fundamental support for the continuously expanding capital expenditures. Currently, the AI computing power supply chain remains buoyant, but the market has recently experienced significant adjustments, with signs of overselling. Moving forward, it is recommended to keep an eye on: first, the growth of ARR related to large models, especially in the Coding scenario. Recently, large models in North America have been subject to price cuts and promotions; if ARR growth encounters short-term bottlenecks, it may affect market expectations for future demand for computing power. Second, the implementation and development of large models in other application scenarios outside Coding. Third, the price trends of the computing power inflation chain in the near future. Fourth, the financing situation for various segments of the AI supply chain and market risk preferences. Additionally, considering the heavy holdings in the AI supply chain in Q2, coupled with recent market adjustments showing signs of a high-low cut, it is advised to focus on undervalued, high-dividend stocks. Risk Warning Changes in the international environment can impact the security and stability of the supply chain and affect the pace at which relevant companies expand overseas; tariff impacts may exceed expectations; slower-than-expected development in the artificial intelligence industry could affect demand from cloud computing supply chain companies; intensifying market competition may lead to rapid declines in gross margins; currency fluctuations could impact exchange earnings and gross margins for export-oriented companies, including those in the ICT equipment and optical module/device sectors; slower-than-expected development of the digital economy and digital China initiatives; slower-than-expected growth in telecommunications operators' cloud computing businesses; capital expenditures from operators may fall short of expectations; capital expenditures from cloud providers may be lower than expected; demand in the communication module and smart controller industries may not meet expectations.