Category: 3. Business

Saudi Arabia is turning its oil wealth toward its massive AI ambitions.

Its chief investment vehicle is Humain, a homegrown company that is building out a full stack of data centers, cloud capabilities, large language models and applications. It’s owned by the Kingdom’s nearly $1 trillion sovereign wealth fund.

Crown Prince Mohammad bin Salman unveiled Humain in May ahead of President Donald Trump’s state visit to Riyadh. This week, at the annual Future Investment Initiative in the same location, the scale, ambition and deep pockets behind the project came into clearer focus.

Humain CEO, Tareq Amin, is setting out to make Saudi Arabia the world’s third-largest AI market, after the United States and China. It’s a bold ambition for a newcomer to the industry, but Amin argues the Kingdom’s competitive edge lies in its abundant and cheap energy resources that can feed the seemingly insatiable demand for computing power.

“We have an advantage in Saudi Arabia,” he told CNN’s Becky Anderson. “Look at this country’s amazing energy grid that doesn’t require a company like Humain to build the substations and the power to deliver that to a data center. That means I have saved 18 months of time.”

Humain plans to build up to six gigawatts in data center capability across the country by 2034, with a rolodex of key AI partners, including Nvidia, AMD, Amazon Web Services, Qualcomm and Cisco.

On Tuesday, Humain announced a $3 billion deal with private equity giant Blackstone to build data centers in the Kingdom.

It also publicly launched Humain One, an AI-powered operating system where users speak or type to a computer to tell it to perform tasks, rather than clicking on icons, as is conventional in systems like Windows or iOS.

Humain has been using the AI system internally to run much of its HR, finance, legal, operational and IT departments. Amin says there is now only one employee in his payroll department, with AI agents handling the rest.

The Kingdom is entering the closing stretch of its Vision 2030 economic transformation plan facing headwinds from declining oil prices and delays in its construction of giga-projects like Neom, placing new urgency on its AI push to support the growth of the Arab world’s largest economy.

It also faces competition from the neighboring United Arab Emirates, which has its own AI vehicle, G42, and recently secured a landmark deal with the Trump administration to build “Stargate UAE,” a sprawling $500 billion data center project billed as the largest outside the United States, with the help of OpenAI, Oracle, Nvidia and Cisco.

Asked whether there’s room for two regional heavyweights, Amin said he supports democratizing AI, while touting Humain’s robust operations.

“It is good for humanity to have knowledge — especially around AI — not to be all centralized in one location. So it’s good what is happening in the UAE. It’s very good what’s happening in Saudi Arabia,” he said. “I will tell you what we decided to do, which is very different … Humane is not a holding company. We are an operating company.”

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For decades, a line of storefronts in Jeffersonville, Ohio, a town of 1,200 people 40 minutes south-west of Columbus, lay empty.

But now locals are hard at work renovating the downtown and paving streets in anticipation of a potential economic boom fueled by a huge new electric vehicle battery manufacturing plant.

Two miles south of Jeffersonville, Korean and Japanese companies LG Energy Solution and Honda are in the midst of sinking $3.5bn into a facility that is expected to begin production in the coming months.

Hundreds of people have been employed in the construction of the plant, and more than 525 people have been hired to work in engineering and other manufacturing roles at the facility. In total, about 2,200 people are expected to be employed on a site that, until several years ago, was open farmland.

But some locals are concerned.

A host of Trump administration policies – tariff measures and the end of clean vehicle tax credits worth thousands of dollars to car buyers – are causing multinational manufacturing companies to consider pausing hundreds of millions of dollars in future investments, a move that would hit small, majority-Republican towns such as Jeffersonville especially hard.

Moreover, a raid by ICE immigration officers on a Hyundai-LG battery plant in Ellabell, a small town in south-east Georgia in September that saw more than 300 South Korean workers detained and sent home has sent shock waves through places like Jeffersonville and the C-suites of international companies alike.

“The construction process has been slowing down. My fear is that the whole thing is going to stop, and we’re left with just unfinished concrete out there,” says Amy Wright, a Fayette county resident, of the under-construction battery plant.

“What’s more, a lot of the people hired to do the construction of the plant are not locals. They are from out-of-state; I’ve met them at the gym.”

While in last year’s presidential election, 77% of voters in Fayette county backed Trump, recent polls suggest his popularity in rural America has taken a nosedive.

One poll suggests that his approval rating among rural Americans has slipped from 59% in August to 47% in October. Others chart his net approval rating in states he won in last year’s presidential election – Ohio, Michigan and Indiana – in negative territory by as much as 18.9 points.

Wright says her son, who works for a local company that supplies Honda with parts, recently received notice that a prior promise of overtime work was being rescinded. She says she believes Honda is reeling in spending due to US government policies.

“Tariffs are affecting everything,” says Wright.

What’s happening in Jeffersonville is being mirrored across the midwest.

In Kentucky, Michigan and elsewhere, global giants Toyota and Stellantis have spent billions of dollars in small communities, much of which came in the form of clean energy tax breaks from the Biden administration’s Inflation Reduction Act of 2022.

Toyota’s biggest production facility on the planet is in a small Kentucky town called Georgetown, where the company employs more than 10,000 people and has invested $11bn in the local economy since the late 1980s. These workers churn out nearly half a million vehicles and hundreds of thousands of engines every year.

However, in August Toyota warned that it faced a $9.5bn financial hit to it and its suppliers due to tariffs imposed by the Trump administration, the largest estimate of any automotive manufacturer. In July, Kentucky’s governor, Andy Beshear, said Trump’s tariffs were undermining investments in the state such as Toyota’s, calling them “chaos”.

Sixty-three per cent of voters in Georgetown’s Scott county backed Trump in last year’s presidential election.

Last April, Stellantis laid off 900 workers at locations across the midwest due to Trump’s tariffs.

In Indiana, one of the largest employers in the state, the Swiss pharmaceutical company Roche is reportedly considering pulling out of $50bn worth of investment in the coming years if Trump follows through on his executive order to target companies that don’t reduce drug prices.

“No [manufacturer] wanted to alienate customers, but those days are past. So, the bulk of tariff price increases will hit in the coming months. This matters, because factory employment is a major share of rural counties in the midwest – about 30% in Indiana, and similar in Illinois, Ohio, Michigan and Wisconsin,” says Michael Hicks, an economist and professor at Ball State University in Indiana.

“These things will clearly have a political effect, but my hunch is not fully for several months. Overlaying all this is the risk of a significant [economic] downturn, where tariffs combine with a financial bubble that would surely hit rural – red – communities very hard.”

Still, others believe that the tariffs will benefit small American towns in the long run.

“Toyota is doing fine and I don’t see [tariffs] as being a big hurt for us here in Georgetown,” says Robert Linder, co-owner of the Porch restaurant that’s situated a mile north of the huge facility, and who worked at the plant for 29 years.

In April, Toyota suggested it might move more vehicle production to Georgetown to beat the tariffs, though that move could be years in the making. Sales of Toyota brands in the US have been growing this year, with the company thus far eating the cost of tariffs rather than passing it on to consumers.

“They just announced a $10bn investment in the United States for more Toyota plants. If Toyota was worried about [tariffs] they wouldn’t be expanding,” says Linder. Recent reports, however, suggest the $10bn figure referred to previously announced investments.

However, large multinationals have a track record of announcing major projects only for reality to play out in a very different way.

In Wisconsin, the Taiwanese tech company Foxconn claimed it would spend $10bn on a facility outside the town of Mount Pleasant. Instead, local taxpayers today find themselves on the hook for $1.2bn spent on highways, attorneys and other infrastructure for a facility that has never transpired.

In Arizona, the Taiwan Semiconductor Manufacturing Company (TSMC), backed directly by Trump, has been plagued with lawsuits related to safety and other issues, and missed project deadlines following promises to become a major employer of local talent.

Despite Ohio’s governor, Mike DeWine, recently claiming there was no need to worry about the future of the LG-Honda battery plant, on 28 October, Honda announced it was reducing production at plants across Ohio due to a semiconductor chip shortage.

While more than two dozen jobs are available at the Jeffersonville site, according to the LG-Honda plant’s hiring website, it’s a far cry from the more than 2,000 positions cited by officials previously.

For Amy Wright, policies coming out of the White House are having a clear effect on residents of rural Ohio. As an organizer of four local No Kings protests against Trump’s policies she’s noticed a change in the people who are coming to the rallies.

“We’ve had more and more people who have voted for [Trump] show up and say: ‘This is not good, this is not what we voted for,’” she says.

The board of Peabody Energy Corporation (NYSE:BTU) has announced that it will pay a dividend of $0.075 per share on the 3rd of December. The dividend yield is 1.1% based on this payment, which is a little bit low compared to the other companies in the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Peabody Energy’s stock price has increased by 64% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Despite not generating a profit, Peabody Energy is still paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.

According to analysts, EPS should be several times higher next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 12%, which makes us pretty comfortable with the sustainability of the dividend.

View our latest analysis for Peabody Energy

Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn’t argument against the possibility of it cutting in the future. Since 2017, the annual payment back then was $0.46, compared to the most recent full-year payment of $0.30. The dividend has shrunk at around 5.2% a year during that period. A company that decreases its dividend over time generally isn’t what we are looking for.

With a relatively unstable dividend, and a poor history of shrinking dividends, it’s even more important to see if EPS is growing. It’s encouraging to see that Peabody Energy has been growing its earnings per share at 48% a year over the past five years. While the company hasn’t yet recorded a profit, the growth rates are healthy. If the company can turn a profit relatively soon, we can see this becoming a reliable income stock.

Overall, it’s nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In general, the distributions are a little bit higher than we would like, but we can’t ignore the fact the quickly growing earnings gives this stock great potential in the future. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 5 analysts we track are forecasting for Peabody Energy for free with public analyst estimates for the company. Is Peabody Energy not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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The global investment spree in artificial intelligence is producing some remarkable numbers and a projected $3tn (£2.3tn) spend on datacentres is one of them.

These vast warehouses are the central nervous system of AI tools such as OpenAI’s ChatGPT and Google’s Veo 3, underpinning the training and operation of a technology into which investors have poured vast sums of money.

Despite concerns that the AI boom could be a bubble waiting to burst, there are few signs of it at the moment. The Silicon Valley AI chipmaker Nvidia last week became the world’s first $5tn company and Microsoft and Apple’s valuations hit $4tn, the latter for the first time. A restructuring at OpenAI has valued the company at $500bn and a stake owned by Microsoft at more than $100bn. This could lead to a $1tn flotation as early as next year.

On top of that, Google’s owner Alphabet has reported revenues of $100bn in a single quarter for the first time, helped by growing demand for its AI infrastructure, while Apple and Amazon have also just reported strong results.

It is not just the financial world, politicians and tech companies who have faith in AI: it is also the communities hosting the infrastructure behind it.

In the 19th century, demand for coal and steel from the Industrial Revolution shaped the destiny of Newport. Now the Welsh city is hoping for a new chapter of growth from the latest transformation of the global economy.

On the outskirts of Newport, on the site of a former radiator factory, Microsoft is building a datacentre that will help meet what the tech industry hopes will be exponential demand for AI.

Standing on a concrete floor that will soon host thousands of humming servers, the Labour leader of Newport city council, Dimitri Batrouni, says the Imperial Park datacentre is a chance to tap into the economy of the future.

“With cities like mine, what do you do? Do you worry about the past and try to bring steel back with 10,000 jobs – it’s unlikely. Or do you embrace the future?” he says.

But despite the market’s current positivity about AI, questions remain about the sustainability of the tech industry’s outlay.

Four of the biggest players in AI – Amazon, Facebook parent Meta, Google and Microsoft – have increased spending on AI. Over the next two years they are expected to spend more than $750bn on AI-related capital expenditure, meaning non-staff items such as datacentres and the chips and servers inside them.

It is a spending spree that Manning & Napier, a US investment company, describes as “nothing short of incredible”. The Newport site alone will cost hundreds of millions of dollars. Last week, the California-based Equinix said it was planning to invest £4bn on a centre in Hertfordshire.

In March, the chair of the Chinese e-commerce group Alibaba, Joe Tsai, warned he was seeing signs of excess in the datacentre market. “I start to see the beginning of some kind of bubble,” he said, pointing to projects raising funds for construction without commitments from potential customers.

There are 11,000 datacentres globally already, up 500% over the past 20 years. And more are coming. How this will be funded is a source of concern.

Analysts at Morgan Stanley, the US investment bank, estimate that global spending on datacentres will reach nearly $3tn between now and 2028, with $1.4tn covered by the cashflow of the big US tech companies – also known as “hyperscalers”.

That means $1.5tn needs to be covered from other sources such as private credit – a growing part of the shadow banking sector that is raising the alarm at the Bank of England and elsewhere. Morgan Stanley believes private credit could plug more than half of the funding gap. Mark Zuckerberg’s Meta has tapped the private credit market for $29bn of financing for a datacentre expansion in Louisiana.

Gil Luria, the head of technology research at the US investment firm DA Davidson, says the hyperscaler investment is the “healthy” part of the boom – the other part less so, which he describes as “speculative assets without their own customers”.

The debt they are using, he says, could trigger ramifications beyond the tech industry if it goes sour.

“The providers of this debt are so eager to deploy capital into AI, that they may not be properly assessing the risks of investing in a new unproven category supported by very quickly depreciating assets,” he says.

“While we are at the early stages of this influx of debt capital, if it does rise to the level of hundreds of billions of dollars it could end up representing structural risk to the overall global economy.”

Harris Kupperman, a hedge fund founder, said in a blogpost in August that datacentres will depreciate twice as fast as the revenue they generate.

Underpinning this expenditure are some lofty revenue expectations from Morgan Stanley, with revenues from generative AI – chatbots, AI agents, image generators – expected to grow from $45bn last year to $1tn by 2028. Tech companies are relying on businesses, the public sector and individuals to produce enough demand for AI – and to pay for it – to justify those revenue expectations.

OpenAI’s ChatGPT, the emblematic product of the AI boom, now has 800 million active weekly users, which is a boon for the optimists. But doubts have been raised over business takeup so far. For instance, investor faith in the AI boom was rattled in August when the Massachusetts Institute of Technology published research showing that 95% of organisations are getting zero return from their investments in generative AI pilots.

The Uptime Institute, which inspects and rates datacentres, says many projects will not be built – an indicator that some are part of the hype machine and won’t get off the ground.

“An important point to understand is that a lot of this speculative,” says Andy Lawrence, the executive director of research at Uptime. “Many of the datacentres, often announced with a fanfare, either will never be built, or will be built and populated only partially, or gradually, over a decade.”

He adds that many of the datacentres announced in this multitrillion-dollar programme will be “either specifically intended to support AI workloads, or will mainly do so”.

Microsoft points out that its Newport datacentre will not be used solely for AI. As well as being the central nervous systems for AI systems such as ChatGPT and Microsoft’s Copilot, datacentres do all the day-to-day IT work we take for granted – as providers of “cloud” services where companies rent out servers instead of buying their own: handling email traffic, storing company files and hosting Zoom calls.

“We have a lot of ways to use this infrastructure. It becomes very much a general purpose technology,” says Alistair Speirs, a general manager at Microsoft’s cloud business.

Elsewhere, though, are massive projects that are all-in on AI. The Stargate venture in the US is a $500bn joint venture between OpenAI, Oracle and SoftBank that aims to build a network of AI datacentres across the US. A UK version of Stargate is also coming to North Tyneside in north-east England. Microsoft is building the word’s most powerful AI datacentre in Fairview, Wisconsin, and is backing an AI-dedicated site in Loughton, Essex, while Elon Musk’s xAI has built the “colossus” project in Memphis, Tennessee.

Work on an estimated 10GW of new datacentre capacity around the world – representing roughly a third of the UK’s power demand – is expected to start this year, according to the property group JLL. However, this is the aggregate maximum capacity and datacentres typically operate at about 60%.

A further 7GW will reach completion this year, according to JLL.

Currently, global datacentre capacity is 59GW, so the pace of expansion is rapid and Goldman Sachs expects it to double by the end of 2030. This carries a further infrastructure cost of its own, according to Goldman, with $720bn of grid spending needed to meet that energy demand.

At the Newport site, a native of the city, the construction safety specialist Mike O’Connell, has returned as a consultant. After a career that has spanned oil rigs, offshore wind and datacentres around the world, he is back at his birthplace – now a tech hub that hosts datacentres and semiconductor companies.

“I am looking to stay in the local community,” he says. O’Connell’s teenage grandson is starting work at the Newport site under an electrical apprenticeship. There is a belief, and hope, that datacentres such as this represent a generational employment opportunity for the area.

Investors and tech companies, having pledged trillions of dollars, are counting on a long-term return, too.

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Car giants from General Motors and Stellantis to Volkswagen are racing to develop autonomous vehicles as they seek to compete with Tesla and other new rivals on “the next frontier” of growth.

After shelving plans to develop robotaxis last year, General Motors recently said it would introduce an “eyes-off, hands-free” semi-autonomous driving system in its vehicles from 2028. Meanwhile, rivals such as Volkswagen and Stellantis are partnering with Uber to scale up its fleet of autonomous vehicles.

Legacy carmakers have long struggled to keep up with the pace of advances in self-driving technology made by the likes of Waymo and Baidu in the US and China. But to fill the gap, some companies have partnered with ride-hailing group Uber while others have poached talent from Apple and technology rivals as they seek new sources of revenue.

“Will there be the stomach by management to try to balance expectations from Wall Street with actually making generational disruptive moves and changes to culture and speed?” Tu Le, founder of the Sino Auto Insights consultancy, said of GM’s revived initiative. “This is the million dollar question.”

None of the systems being developed envision full automation that will be driverless at all locations. But the ultimate aim is for the vehicle to drive itself on its own without human intervention in certain defined areas.

GM’s work is being led by its new chief product officer and driverless tech pioneer Sterling Anderson, who joined GM in June after co-founding driverless vehicle start-up Aurora. Before that, he led Tesla’s Autopilot efforts.

“Autonomy will make our roads safer. It will be the cornerstone of GM’s modern portfolio going forward,” Anderson said.

Anderson plans to debut the company’s new semi-autonomous system in the Cadillac Escalade IQ, an electric sport utility vehicle, that will allow drivers to take their eyes and hands off the road while driving on some highways.

But analysts say the pivot towards autonomous technology will pose an inherent dilemma for traditional carmakers.

Margins in the ride-hailing market are notoriously thin, and scaling a robotaxi service will require heavy capital investment at a time when the automotive industry is already struggling with the higher costs of developing electric vehicles and the loss of profits in China.

“The carmakers need to produce profit and cash whereas the big tech giants need to produce growth. The market is not holding them to the same agenda, which gives the tech giants a much greater advantage to pursue things like robotaxis,” HSBC analyst Mike Tyndall said.

Individual ownership of vehicles is also a limitation to ride hailing. For the industry’s economics to work, “we’ll have to give up personal ownership”, he added.

To save costs and accelerate the pace of expansion, rivals such as Volkswagen and Stellantis have chosen to partner with Uber to scale up its fleet of autonomous vehicles.

Stellantis said last week it would jointly develop robotaxis with Uber, chipmaker Nvidia and Taiwan’s Foxconn with the aim of producing them from 2028. Starting in the US, Uber plans to deploy about 5,000 of Stellantis’ autonomous vehicles with capabilities that can be driven by themselves in limited, pre-mapped areas.

The group behind Jeep, Peugeot and Fiat brands is also collaborating with Chinese robotaxi company Pony.ai to develop autonomous vehicles in Europe.

“I’m convinced we can deliver substantial value in the emerging robotaxi market and space,” Stellantis chief executive Antonio Filosa told analysts on Thursday.

In April, Volkswagen said it plans to commercially launch its ID. Buzz autonomous vehicles on the Uber platform, starting in Los Angeles next year.

VW’s tie-up came after Argo AI, a self-driving vehicle group jointly backed by the German group and Ford, abruptly shut down in late 2022. Executives acknowledged at the time that establishing fully autonomous technology that is profitable and scalable would cost billions of dollars and take too long.

Having invested more than $10bn over the past decade, GM’s chief executive Mary Barra also ended efforts to build and manage a fleet of robotaxis after a disastrous accident in 2023 brought a halt to operations at Cruise, its former driverless car division. 

While Tesla and Waymo, the Alphabet-owned self-driving car company, have pinned their future in expanding their robotaxi service, GM has pivoted towards developing self-driving vehicles for personal use with its Super Cruise “hands-off” driver assistance software.

“We’re enjoying approximate 70 per cent margins on [the Super Cruise] business,” Barra said at a recent earnings briefing, adding that Super Cruise customers have nearly doubled year-on-year to more than 500,000. 

“When you look at owning a fleet and all the other aspects that go into running a robotaxi fleet, that’s not our core business today. We are focused on personal autonomy.” 

Additional reporting by Stephen Morris in San Francisco