MORGAN STANLEY: Tech giants are investing way more ‘aggressively’ in data centers than anyone thought, and it’s driving double-digit growth (AMZN, FB, GOOGL, MSFT)

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  • Tech giants are investing more heavily in infrastructure than previously believed, according to Morgan Stanley.
  • In a report Tuesday, the firm said it expects cloud capital expenditures to grow 29% year-over-year in 2018. The firm previously thought growth would be closer to 23%.&
  • The change is primarily led by giants like Facebook and Amazon who have billions of dollars to spend on data centers and other infrastructural projects.


Major infrastructure investments by tech giants like Facebook and Amazon have led to a surprise bump in 2018 data center spend, according to Morgan Stanley analyst& Katy L. Huberty.&

In a report Tuesday, Huberty said that Morgan Stanley expects cloud capital expenditures to grow 29% year over year in 2018, thanks to "continued workload shift to public cloud and easing component constraints." The firm had originally expected 23% growth, but raised its estimate after seeing how companies acted in the first quarter.

This puts growth in the space 13 percentage points higher in 2018 than in 2017, when the space saw just 16% growth.

"We see hyperscale data center investment inflecting above our prior expectations," Huberty wrote.

Among the big spenders are Amazon, Facebook, Google and Microsoft, who together make up 75% of the capital expenditures of the 14 companies tracked by Morgan Stanley its Cloud CapEx Tracker.&

Amazon "continues to invest heavily to expand AWS capabilities and improve data center efficiency," while Facebook also has plans to invest around $15 billion in data centers, servers, network infrastructure and office facilities, according to the report.

"Similarly, both Google and Microsoft highlighted the need to invest aggressively in their data center business," Huberty wrote.

But it's not just giants making investments in cloud. An April Morgan Stanley survey of 100 chief information officers "suggests the percentage of total company workloads residing on the public cloud will increase from 20% today to 44% by 2021," according to the report.& Morgan Stanley Cloud CapEx May 2018

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