|
In part 1 we talked about the increasing stress on the consumer, and how the broad index seems to be ignoring it.
In part 2 we talked about the AI Capex spending that’s propping up the index.
Today we’re going to talk about how that’s getting paid for.
The Spending is Massive
The AI buildout currently going on is expected to be the biggest infrastructure buildout in history.
 |
Hyperscalers like Google, Meta, Microsoft, and Oracle are expected to spend around $8000 billion this year, and more than a trillion dollars in each of the next few years on AI.
 |
That’s going to eat up all of their free cash flow.
 |
Which means they’ll be turning to debt, and a lot of it.
 |
Circular Financing and Hidden Debt
The headline numbers for AI investment, demand and revenue are huge.
And they’re growing quickly.
 |
Of course, the demand and projected revenues from all this building and demand extend to suppliers, like memory companies for example.
 |
But all of that demand and revenue might not be what it seems.
A lot of this could be the industry financing itself.
Circular Deals
Let’s start with circular financing - this was huge in the 90’s fiber bubble, and it’s making a return today.
NVIDIA is really at the center of this, so let’s show you how it works with an example.
Step 1: NVIDIA