Jefferies’ Global Head of Equity Strategy Chris Wood is warning that the AI trade will eventually be broken not by a sudden collapse in demand for chips, but by a market-wide realisation that hyperscalers and leading AI labs cannot earn an adequate return on the vast capex they are undertaking. He sees concerns over “malinvestment” as the specific risk that will finally trigger the end, or at least a painful pause, in the AI boom.
In his latest newsletter Greed & Fear , Wood describes the ongoing AI build‑out as “the most dramatic capex cycle” he has ever seen, driven by hyperscalers and foundries racing to ramp data‑centre and compute capacity. TSMC, for instance, has lifted its capex guidance for 2026 to about US$56 billion from US$41 billion last year, with Jefferies’ Taiwan partner Fubon Research now projecting US$65–70 billion of capex in 2027.
