Despite worries bubbling up this week around the debt load at neocloud provider CoreWeave, the AI trade remains “resilient,” Bank of America analysts led by Vivek Arya argue. They cite one key metric to prove that thesis: utilization.
The AI capex boom has often drawn comparisons to the fiber optic build-out and subsequent collapse of the early 2000s, when companies laid massive amounts of cable on the expectation that demand would follow supply. When that demand took longer than expected to show up, several companies went bankrupt.
What’s different with AI, the BofA analysts argue, is utilization rates. Unlike the early days of fiber, “deployed AI infrastructure runs near 100% utilization rate,” the analysts write, while GPU rental rates have risen 12% to 37% year to date, “a sign of scarcity, not glut.”
The move from traditional computing to generative AI models drove the first wave of demand, the analysts said, with the second wave driven by the shift to reasoning models and the third set to be kicked off by demand for agentic capabilities.
There are some risks, the analysts say: a potential credit wipeout at a neocloud company like CoreWeave, increased pressures from the rates market, and power or permitting delays. Yet Arya and his team remain bullish.
“Rising rates, geopolitics, data center backlash and stress at some sub-IG neoclouds have revived dot-com comparisons, and the SOX has already endured multiple 20%+ bear markets this year,” the analysts wrote. “We think the risk is priced in.”