Key Takeaways
- • Pershing Square's Bill Ackman and Ryan Israel characterized the projected trillion-dollar AI capital expenditure by hyperscalers Microsoft, Amazon and Meta as "offensive rather than defensive," meaning designed to accelerate growth rather than protect existing franchises.
- • The shareholder letter cited consensus estimates that the hyperscalers will collectively spend a little over $1 trillion on capital expenditures in 2027.
- • Pershing Square argued the hyperscalers can fund the substantial majority of their capex from core business cash flows, describing them as "in a vastly stronger financial position."
- • AWS revenue growth accelerated to 39% in the third quarter, which the letter attributed in part to AI.
- • The letter also flagged Uber trading at its "lowest valuation ever" and argued Netflix's engagement concerns overshadow the quality of its engagement.
Summary
Bill Ackman's Pershing Square Inc. has argued in a recent shareholder letter that the artificial intelligence capital expenditures of Microsoft Corp., Amazon.com Inc. and Meta Platforms Inc. are designed to accelerate growth. Chief Executive William Ackman and Chief Investment Officer Ryan Israel described the projected trillion-dollar outlay by major technology companies as "offensive rather than defensive," responding to investor concerns about returns on elevated spending by the hyperscalers.
The letter said the hyperscalers are "investing to accelerate growth and are deploying capital behind a transformative technology that plays directly to their competitive advantages." On Amazon, the executives wrote that "Amazon is extremely well positioned across the AI stack" and that AI had helped AWS accelerate revenue growth to 39% in the third quarter. On Meta, the letter credited AI with improving ad targeting, generative ad copy and content recommendation, and said frontloading compute investment gives the company optionality to scale its Muse offering to a billion or more users. On Microsoft, the executives said the company has two large channels to monetize its compute and that the narrative on the stock had shifted from AI laggard to AI leader.
The letter also addressed funding. Ackman and Israel noted that the hyperscalers are collectively expected to spend a little over $1 trillion on capital expenditures in 2027 based on consensus estimates, but argued they can finance the substantial majority of that spending from the cash flows of their core businesses.
Beyond the hyperscalers, the letter highlighted Uber Technologies, which the executives said trades at its lowest valuation ever, and wrote that concerns over autonomous vehicles are increasingly disconnected from its business performance, projecting earnings per share compounding at 25% or more. On Netflix, the letter attributed recent stock declines to concerns about plateauing engagement and argued that measuring engagement solely by watch time overshadows engagement quality, concluding the market vastly undervalues the company's growth profile and business quality.
Performance figures cited in the accompanying table show Netflix down 33.51% year to date and Uber down 18.36% year to date, while Microsoft was up 4.86% year to date and Amazon up 6.42%. Meta was down 8.08% year to date. The content was partially produced with AI tools and reviewed by Benzinga editors.
The letter said the hyperscalers are "investing to accelerate growth and are deploying capital behind a transformative technology that plays directly to their competitive advantages." On Amazon, the executives wrote that "Amazon is extremely well positioned across the AI stack" and that AI had helped AWS accelerate revenue growth to 39% in the third quarter. On Meta, the letter credited AI with improving ad targeting, generative ad copy and content recommendation, and said frontloading compute investment gives the company optionality to scale its Muse offering to a billion or more users. On Microsoft, the executives said the company has two large channels to monetize its compute and that the narrative on the stock had shifted from AI laggard to AI leader.
The letter also addressed funding. Ackman and Israel noted that the hyperscalers are collectively expected to spend a little over $1 trillion on capital expenditures in 2027 based on consensus estimates, but argued they can finance the substantial majority of that spending from the cash flows of their core businesses.
Beyond the hyperscalers, the letter highlighted Uber Technologies, which the executives said trades at its lowest valuation ever, and wrote that concerns over autonomous vehicles are increasingly disconnected from its business performance, projecting earnings per share compounding at 25% or more. On Netflix, the letter attributed recent stock declines to concerns about plateauing engagement and argued that measuring engagement solely by watch time overshadows engagement quality, concluding the market vastly undervalues the company's growth profile and business quality.
Performance figures cited in the accompanying table show Netflix down 33.51% year to date and Uber down 18.36% year to date, while Microsoft was up 4.86% year to date and Amazon up 6.42%. Meta was down 8.08% year to date. The content was partially produced with AI tools and reviewed by Benzinga editors.
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