Li Bei of Banxia Investment: AI capital expenditure is likely to peak by mid-next year, with a risk of a second round of decline.

Li Bei, a renowned Chinese hedge fund manager and founder of Shanghai-based Banxia Investment, warned of AI bubble risks in an exclusive interview with Tencent Finance. She noted that while overseas AI capital expenditure (capex) remains on the rise, its quarter-on-quarter growth rate is likely to peak by mid-next year. Earlier, cloud service providers’ increased investment was built on the assumption of rapid linear growth in AI model revenue. Extrapolating from first-quarter trends, total AI model revenue will reach around 500 billion yuan by the end of this year, exceeding 1 trillion yuan in 2025 and 2026. If this aligns with the current annual capex of over 1 trillion yuan, it would not constitute a bubble. However, in reality, annual recurring revenue (ARR) growth slowed significantly in the second quarter. Li added that the AI sector’s correction since July is not a "Davis double play" (a scenario where both valuation and earnings expectations plummet); only valuations have fallen, and the market still expects substantial profit growth in 2027. But if ARR fails to pick up, investment levels will become unsustainable, and capex will likely peak in 2027. If not in 2027, it will peak in 2028. She judged that the AI sector’s "second wave of decline" will only materialize when capex truly peaks and profit expectations start to decline, likely around mid-next year. When the AI boom fades, the U.S. economy slows, U.S. Treasury yields drop, and the U.S. dollar depreciates, China’s consumer sector may instead emerge as an "oasis in the desert" for global assets.