To: Johnny Canuck who wrote (66398 ) 10/3/2025 10:29:26 PM From: Johnny Canuck Read Replies (2) | Respond to Danger Will Robinson Danger!!!!! TILT ... TILT ... TILT ... TILT !!! Capex projections: Hyperscalers are forecast to spend $490 billion on AI infrastructure in 2025, up from $420 billion estimates earlier this year. Specifics include Microsoft at $100 billion, Amazon and Alphabet surging, and Oracle at $58 billion by FY2027. Funding shift: Initially supported by operating cash flows (OCF), but now increasingly debt-financed. Goldman Sachs notes AI spending is "increasingly fueled by debt," with $141 billion in corporate debt issued in 2025 by AI-related firms, slightly weakening credit quality. Citi analysts confirm a "debt funded stage," exposing the boom to default and rate risks, as companies "cannot sustain the exponential increase... solely through operating cash flows." Examples: Oracle spent more than its OCF in the last two quarters and issued $18 billion in bonds for cloud/AI expansion. Major spenders like Microsoft and Oracle use accounting maneuvers (e.g., finance leases, SPVs) to underreport capex and inflate profits, masking cash flow strains. Step 3: Assessing AI Service Cash Flows and Revenue Support AI revenue: U.S. consumer spending on AI services is only $12 billion annually—dwarfed by $400 billion in 2025 capex (equivalent to a new Apollo program every 10 months). Enterprise adoption is growing (e.g., Azure AI up, but overall AI usage declining at some large firms for cost savings), yet it doesn't match the scale. Analysts warn of "circularity" in the ecosystem, with investments betting on future demand not yet realized. Sustainability concerns: Free cash flow (FCF) growth is dropping for AI cloud providers, and capex is "unsustainable," distorting S&P 500 valuations with negative FCF for big tech. S&P Global counters that tech giants "have funded... through operating cash flows and possess the capacity to sustain," but this is outnumbered by debt-focused warnings. Step 4: Weighing Evidence and Conclusion The evidence leans toward the claim being accurate: While early AI capex drew from strong OCF (e.g., cloud profits), the 2025 surge relies on debt amid nascent AI revenues ($12B vs. $490B capex), risking a bubble pop if adoption lags. Counterviews exist but are optimistic; the consensus highlights overbuild risks.cash flows from AI services, which generate only about $12 billion annually in U.S. consumer spending despite growing enterprise use. Companies like Oracle have already outspent their operating cash flows for multiple quarters, resorting to $18 billion in bond issuances, while broader trends show $141 billion in AI-related corporate debt issued this year. This shift exposes the buildout to interest rate and default risks, as the revenue from consumable AI services (e.g., cloud tools for businesses) remains far too small to justify the scale without speculative bets on future growth. Although some analysts note initial funding from operating cash flows provides a buffer, the consensus warns of unsustainability, with free cash flow growth declining and capex warping economic priorities.Key Citations with URLs:
