One theme throughout 2024 has been the continued momentum in generative AI infrastructure build-out, most notably by the large cloud companies Alphabet, Amazon, Microsoft and Oracle, who S&P estimate collectively invested $194 billion in capex over the year, up 52% over 2023. This has come at the expense of spending on M&A, with a combined two deals between them in 2024. However, the recent launch of DeepSeek shows what can be accomplished with much more limited capex, and this may help to rebalance capital allocation towards strategic M&A again in 2025.
Another factor no doubt has been an active regulatory climate in which several pending M&A deals have been blocked. Expectations for a softening approach to regulatory oversight under the new US administration could lead to a resurgence in larger ticket strategic M&A in 2025.
