Gartner, a Wall Street research and consulting firm, is standing by its forecast from last week: as much as $3.5 trillion in artificial intelligence (AI) infrastructure investment could be at risk, driven by market concerns that ballooning AI capital expenditure may not generate corresponding revenue.
John Lovelock, Gartner's chief forecaster, said on Monday that current industry returns are simply not sufficient to support the enormous amounts of capital being deployed. Gartner published a report last week stating that by 2030, most emerging cloud service providers will cease to exist, potentially triggering a broader stock market pullback.
"The market is facing a severe timing mismatch, alongside an oversupply of computing power," Lovelock said. "Currently, we have more computing capacity than demand, and a large volume of tokens and processing power is being given away through freemium offerings." Lovelock said on Monday that "every participant in the AI race is competing for the position of 'last survivor.' In the AI race tracked by Gartner, nearly every market could evolve into a duopoly."
According to Gartner's analysis, a commercial duopoly in the leading frontier model space is taking shape around Anthropic and OpenAI. Lovelock stated that the massive computing assets built by independent service providers — namely emerging cloud service providers — to serve this duopoly require cash flow support, but cash flow has not grown in step with upfront costs.
Gartner's warning is regarded as one of the triggers for the sharp selloff in AI computing stocks during this cycle. Emerging cloud service provider CoreWeave (CRWV.US) closed down 0.4% on Monday, after falling more than 25% cumulatively in the week ending October 16. However, its peers Iren (IREN.US), Nebius (NBIS.US), and Applied Digital (APLD.US) all closed higher on Monday after experiencing significant pullbacks last week.
Revenue Deceleration and Capital Misallocation
Lovelock's research emphasizes that between 2027 and 2030, overall AI revenue will be insufficient to generate profitable returns on planned capital expenditure. This cautious stance is also reflected in the slowing financial growth of foundation model companies. For example, Anthropic's quarterly revenue growth rate has slowed markedly, dropping from 140% in the second quarter to 45% in the third quarter. Analysts noted that Anthropic's quarterly revenue of $16.8 billion remains relatively small compared to the more than $5 trillion that hyperscale cloud providers are expected to spend building ecosystems by 2030.
Lovelock also stated that AI should be viewed as a foundational technology rather than an isolated market.
U.S. Stocks Rebound but Caution Persists
Gartner's report has had a significant impact on market sentiment, exacerbating stock market volatility. Wolfe analysts noted that the market was already tense when the Gartner report was released, and warned that emerging cloud service providers are particularly vulnerable to infrastructure asset impairment shocks. In the week ending October 16, the S&P 500 fell 2%, and the Nasdaq Composite dropped 4%, as investors retreated from high-flying tech stocks. Over the same period, the Dow Jones Industrial Average rose 0.7%. On Monday, tech stocks staged a strong rebound, pushing the Nasdaq up more than 1% and the S&P 500 up 0.41%.
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