Glossary term
Capex Intensity
Capital expenditure as a share of revenue. It shows how much of every dollar of sales a company reinvests in plant, equipment and — for the AI builders — data centres and chips. Hyperscaler capex intensity has more than doubled since 2023.
AI-generated — produced automatically by Closelook’s systems under this site’s editorial policy.
What it means
Divide a year’s capital expenditure by the same year’s revenue. A software company might spend 3% to 5%; a utility 20% to 30%; a semiconductor foundry 40% or more in a build phase. The ratio tells you what kind of business you own — asset-light or asset-heavy — and, as it changes, whether the company is becoming more capital-intensive than its valuation assumes.
Rising intensity is not bad in itself; it is bad when the returns on the new capital are lower than the old, or when the capital is funded with debt at a higher real rate than the returns justify.
Why it matters for the AI trade
The hyperscalers were asset-light businesses that have become asset-heavy: capex intensity at Microsoft, Alphabet, Meta and Amazon rose from the low teens to above 20% of revenue between 2023 and 2026, and Oracle’s rose faster still. Every point of intensity is demand for the Rubin Build-Out 100 and, on the other side, a claim on future cash flow that a higher real yield discounts harder. The capex cycle is the time dimension of the same number.
How Closelook uses it
The credit stress tape pairs intensity with free-cash-flow cover to show who can afford their programme; the capex cliff read is the scenario in which intensity falls faster than the suppliers expect.
Common questions
- What is a high capex intensity?
- Above 20% of revenue is heavy for a technology company and normal for a foundry or a utility. The number should be read with the return on that capital: high intensity with rising returns is a build-out, high intensity with falling returns is a problem.
- Why did hyperscaler capex intensity rise so much?
- AI data centres cost far more per unit of revenue than the web and cloud infrastructure that preceded them, and the companies chose to build ahead of demand rather than behind it.
- Is capex intensity the same as the capex cycle?
- No. Intensity is a level at a point in time; the cycle is how that level rises and falls over years, and where in that arc the suppliers’ orders sit.