The $3 trillion AI datacenter boom is being led by an “incredible” spending spree from just four companies: Amazon, Meta, Google, and Microsoft. Known as the “hyperscalers,” these tech giants are projected to spend more than $750 billion on AI-related capital expenditure over the next two years.
This spending is fueling, and being fueled by, record-breaking market performance. Google’s parent, Alphabet, just reported its first $100bn quarter, thanks to AI demand. Nvidia, which makes the chips these hyperscalers buy, is now a $5tn company. Microsoft and Apple are both valued at $4tn.
This $750bn is seen by analysts like Gil Luria as the “healthy” part of the boom. These companies have massive cash flows and existing customer bases for their cloud and AI services. Microsoft’s new datacenter in Wales, for example, will be a “general purpose technology,” handling everything from its AI Copilot to standard email and Zoom calls.
However, the sheer scale of the hyperscalers’ investment is creating a “bubble” of “speculative assets” in its wake. Their $750bn spend is part of a $3tn global projection, leaving a $1.5tn gap. This gap is being filled by other developers, many of whom are using risky private credit to fund projects “without their own customers.”
While the hyperscalers’ bet seems secure, the exuberance they have created is causing concern. If the speculative half of the market, which is trying to ride their coattails, collapses, it could “represent structural risk to the overall global economy.”