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AI Capex, Depreciation & Return Model

Model how AI infrastructure vintages flow through depreciation, replacement spending, free cash flow, and the revenue required to earn a return.

Investor scenario model

AI Capex, Depreciation & Return

Model capex vintages, book depreciation, economic obsolescence, replacement needs, and the revenue required to earn a selected return.

Illustrative · $bn

Investment program

Starting year

Projection years

First-year capex

$bn

Annual capex growth

Equipment share

The remainder is treated as buildings and long-lived infrastructure.Maintenance floor

% of capex

Maintenance is the greater of this floor or modeled economic consumption.

Asset lives & returns

Equipment book life

years

Equipment economic life

years

Building book life

years

Building economic life

years

Incremental margin

Operating contribution before incremental depreciation.Cash tax rate

Required cash return

Required revenue

$428.7bn

Revenue needed in 2033 under the selected margin and cash-return assumptions.

Incremental EBIT

$62.1bn

Operating contribution after modeled book depreciation.

Steady-state FCF

$41.9bn

After-tax EBIT plus depreciation, less modeled maintenance—not total growth capex.

Modeled ROIC

14.6%

After-tax operating profit divided by average modeled invested capital.

Depreciation waterfall

Each annual spend is a separate straight-line vintage. Economic consumption uses economic life; book depreciation uses accounting life.

Annual AI capex depreciation and return projection
Year	Capex	Book dep.	Economic use	Obsolescence gap	Maintenance	Invested capital	Required revenue
2026	$60bn	$8.0bn	$11.7bn	$3.7bn	$13.2bn	$52bn	$53.3bn
2027	$67.2bn	$17bn	$24.9bn	$7.8bn	$24.9bn	$102.1bn	$111.4bn
2028	$75.3bn	$27.1bn	$39.6bn	$12.5bn	$39.6bn	$150.2bn	$178.8bn
2029	$84.3bn	$38.4bn	$56.1bn	$17.7bn	$56.1bn	$196.1bn	$250.9bn
2030	$94.4bn	$51.1bn	$63.7bn	$12.7bn	$63.7bn	$239.5bn	$289.4bn
2031	$105.7bn	$65.2bn	$72.3bn	$7.1bn	$72.3bn	$279.9bn	$329.1bn
2032	$118.4bn	$73.9bn	$81.9bn	$8.0bn	$81.9bn	$324.5bn	$376.2bn
2033	$132.6bn	$83.6bn	$92.7bn	$9.1bn	$92.7bn	$373.5bn	$428.7bn

Preset sensitivity

Bull5y equip. life

$234.8bn

Required revenue in 2033 · 10.5% ROIC

Base4y equip. life

$428.7bn

Required revenue in 2033 · 14.6% ROIC

Bear3y equip. life

$845.3bn

Required revenue in 2033 · 20.4% ROIC

How the return hurdle works: required revenue is solved so after-tax EBIT plus book depreciation, less maintenance capex, equals the selected cash return on average invested capital.

These presets are illustrative scenarios, not company forecasts. The model assumes assets enter service in the spending year, straight-line depreciation, constant asset mix, and no working-capital, financing, stock-compensation, acquisition, salvage-value, or terminal-value effects. Economic consumption is a scenario cost—not reported depreciation. Results are rounded and should be reconciled to company filings before investment use.

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Hyperscaler capex does not hit earnings all at once, and accounting useful life can differ sharply from economic obsolescence. This investor model separates equipment from buildings, creates a vintage depreciation waterfall, and translates editable bull, base, and bear assumptions into EBIT, free-cash-flow, ROIC, and required-revenue ranges. Defaults are scenarios rather than company forecasts.

How this ai capex, depreciation & return model works

The model creates separate annual equipment and building capex vintages, depreciates each over its accounting life, and estimates replacement spending from the shorter economic life. It then translates those burdens into editable return and monetization thresholds.

Formula

Vintage depreciation = annual capex ÷ accounting life; required revenue = annual return burden ÷ incremental operating margin

This model does not reconstruct a company's full fixed-asset ledger, tax depreciation, capitalized interest, leases, acquisitions, or exact in-service dates. Treat the output as sensitivity analysis.

Primary specifications

Before you use the result

Assumptions

• Capex is split between equipment and long-lived infrastructure using the selected mix.
• Straight-line depreciation is a modeling approximation; company policies and in-service timing can differ.
• Economic replacement and accounting depreciation are intentionally modeled separately.

Quick start

1. Choose a scenario, then replace the capex and asset-mix inputs with evidence from the relevant filing.
2. Test accounting lives and shorter economic lives for rapidly obsolescing equipment.
3. Compare bull, base, and bear revenue or margin assumptions rather than relying on one point estimate.

Frequently asked questions

Why separate accounting depreciation from economic obsolescence?

Accounting depreciation follows the useful life used in financial statements. Economic obsolescence asks when equipment must be replaced to remain competitive. A server can still have book value even if newer accelerators make replacement economically necessary.

What is a capex vintage waterfall?

Each annual spending cohort is treated as its own vintage and depreciated over its selected life. Adding the overlapping vintages estimates the future depreciation burden instead of dividing one year's capex by one life assumption.

How is required incremental revenue estimated?

The model divides the annual return burden by an editable incremental operating-margin assumption. It is a scenario threshold, not a claim that all spending is attributable to one product or will produce that revenue.

Are the scenarios company forecasts?

No. They are editable sensitivity cases. Use current filings and management guidance before applying the result to a specific company.

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Go deeper

2026 hyperscaler AI capex trackerSource the spending assumptions The AI depreciation lagWhy the accounting bill arrives later

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