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For much of the past year, the biggest question surrounding the AI boom has been whether hyperscalers could generate enough returns to justify their massive infrastructure spending.
JPMorgan analyst Harlan Sur says the answer is beginning to emerge, arguing that improving AI economics at companies like Amazon.com, Inc. (AMZN) and Microsoft Corp (MSFT) could extend the investment cycle—and create a more durable tailwind for memory suppliers such as Sandisk Corp (SNDK).
JPMorgan's latest semiconductor research argues that the conversation around AI infrastructure is shifting from spending to returns.
Sur pointed to recent commentary from Amazon, Microsoft and Alphabet Inc. (GOOGL) (GOOG) indicating that demand for AI services remains strong while the economics of those investments are improving. Amazon reported stronger growth and profitability in its Amazon Web Services (AWS) business and said much of its AI infrastructure has already been contracted under long-term agreements, giving it greater confidence in future returns.
Microsoft and Alphabet delivered similar messages, highlighting healthy demand, expanding customer commitments and improving returns on their AI investments.
According to Sur, these developments suggest that AI infrastructure spending is increasingly supported by business fundamentals rather than speculative investment, strengthening the case for continued capital spending across the cloud industry.
A longer AI investment cycle could translate directly into stronger demand for memory and storage.
Sur noted that memory remains one of the tightest parts of the AI supply chain, with Amazon attributing part of its recent increase in capital spending to higher memory costs. More importantly, cloud providers appear willing to absorb those costs to secure enough capacity for expanding AI workloads.
That dynamic reinforces pricing power for suppliers of high-performance memory and enterprise storage. JPMorgan said companies such as SanDisk stand to benefit as demand for enterprise solid-state drives (eSSDs) grows alongside increasingly data-intensive AI infrastructure.
JPMorgan's bullish view on SanDisk is less about another surge in AI spending than about what is sustaining that spending. As Amazon, Microsoft and other cloud providers begin to demonstrate that AI infrastructure can generate attractive returns, they have greater incentive to keep investing despite higher memory costs.
For investors, the key question now is whether improving AI economics continue to translate into durable demand and pricing power for memory suppliers—a trend that could support SanDisk well beyond the current investment cycle.
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