Big Tech’s AI Spending Is $3 Trillion Higher Than It Seems Due To Off-Balance Sheet Commitments

https://www.wsj.com/tech/ai/why-big-techs-ai-spending-is-3-trillion-higher-than-it-seems-e1067bb2

There’s a lot of off balance sheet commitments from the hyperscalers and some of that we know is circular funding. Alphabet and Amazon recently posted negative free cash flow and that’s before considering these commitments.

The first sign that AI demand isn’t going to meet future supply, this thing is going to crumble. It will move slow initially (e.g. open source model adoption will slowly increase and take market share) then OpenAI funding will dry up meaning they can no longer run their freemium models and boom, the contagion starts and spreads to private credit, institutions, and public markets all leveraged to the tits on this mania.

Remember folks, it doesn’t have to be a dot com or GFC equivalent crash to still cause a lot of pain. NASDAQ dropping 40% instead of 80% will still be catastrophic.