Who will pay for the trillion dollar AI boom?

Copyright © HT Digital Streams Limit all rights reserved. Economist, The Economist 4 min Read 03 Oct 2025, 04:25 PM IST spending on data centers means that the firms have property and equipment (representatives generated using AI) Summary A technological revolution meets a financial one of the largest technology companies in America. Investors who bought shares in Alphabet, Meta and Microsoft a decade ago, have their money at eight times, with the exception of dividends. Spending on data centers means that the firms have property and equipment (accounting for hard assets) which are more than 60% of their stock book value worth 20% in the same period. During the past year, add the capital expenditure of these firms to that of Amazon and Oracle, two more technical giants, and the amount is greater than the interpretation of the US industrial companies that have been put together. Jason Thomas of Carlyle, an investment firm, estimates that the expenses on the third quarter were responsible for a third of America’s economic growth. This year, businesses spend $ 400 billion on the infrastructure needed to execute models for artificial intelligence (AI). Predictions of the ultimate bill are uniformly enormous. Analysts at Morgan Stanley Reckon $ 2.9TRN will be spent at the end of 2028 on data centers and related infrastructure; Consultants at McKinsey set it at $ 6.7TRN by 2030. Like a bad party in a good restaurant, no one is quite sure who will fetch the tab. Much of the load will fall at the most important point of Big Tech. Since 2023 Alphabet, Meta and Microsoft have divided $ 800 billion in operating cash flow between Capeex and shareholder returns. This Goldilocks Capital allocation, which combines a boom in the building with a trip to the bank, is unprecedented, even among their own ranks. Amazon’s shareholders pay for large Capeex accounts, but are hungry for returns; Apple investors have benefited from big stock repurchase, but is concerned that the company’s lack of investment means it falls behind on AI. But Capeex is growing faster than cash flow. Morgan Stanley’s calculations indicate a $ 1.5 -dollar financing gap between the two over the next three years. This may be greater if the progress in technology expenses further increases and kills existing cash cows. Conversely, if companies are slower to adopt AI as consumers, Big Tech will struggle to earn a quick return on its investment; Shareholders can then demand a larger part of their earnings to compensate for this sluggish growth. More sure than the size of the financing gap is the type of investors who want to fill it. The hot center of the AI ​​boom moves from stock markets to debt markets. This is surprising, as the attitude of the biggest technical firms towards debt was essentially German. They are seen much less about their bankers than telecommunications outfits at the beginning of the century were during the Dotcom mania. Forest balance states are valued. Major issues were weighed by even larger stacks of cash. (If the ‘beautiful seven’ technical firms put together their liquid financial assets and formed a bank, it would be America’s tenth big.) It was changed slowly. During the first half of the year, investment grade loans by technical firms were 70% higher than in the first six months of 2024. In April, alphabet issued bonds for the first time since 2020. Microsoft has reduced its cash pile, but its financing leases-a type of debt that is mostly related to data centers-and the triplets of the lab is not yet of balance. Meta is in talks to borrow about $ 30 billion from private credit lenders, including Apollo, Brookfield and Carlyle. The credit bond market supported by loans associated with data centers, where commitments are combined and cut in a way similar to mortgage mortgages, grew from almost nothing in 2018 to around $ 50 billion. The rabbit to borrow is more furious among the challengers of Big Tech. Coreweave, an AI cloud firm, lent liberal to private credit funds and mortgage investors to buy chips from Nvidia. Fluidstack, another cloud-calculated startup, also borrows a lot and uses its chips as collateral. Softbank, a Japanese firm, finances its share of a giant partnership with Openai, Chatgpt Manufacturer with debt. “They don’t really have the money,” Elon Musk wrote when the partnership was announced in January. After collecting $ 5 billion in debt earlier this year, Xai, Mr. Musk’s own startup, allegedly $ 12 billion to buy chips. This means that the Technology revolution is increasingly in touch with a financial. Those at the pinnacle of Silicon Valley are not the only elite in the West, which, after being located in the field of ideas, decided that the physical world is where it is. Private equity firms are forming themselves as borrowers for the real economy. The resulting balance sheet transformation was, if anything, more dramatic than the one in Silicon Valley. Data centers produce large amounts of debt. It easily sits on the large balance sheets run by these outfits, often funded by life insurance policies. Like major technology, private markets are increasingly concentrating. Technical firms increase capital because they think the profits of AI will be concentrated among a few players. Investors lend them because they know that the same thing is on Wall Street. This symbiotic escalation is in some ways an advertisement for American innovation. The country has both the world’s best AI engineers and its most enthusiastic financial engineers. For some, this is also a warning sign. Lenders may find that they take technology risk, as well as the standard and interest rate risks they are used to. The history of previous capital cycles should also make it nervous. Capex trees regularly lead to overbuilding, leading to bankruptcies when yields fall. Equity investors can defend such an accident. The types of leverage investors, such as banks and life insurers, who believe they are safe. Subscribers to The Economist can subscribe to our opinion newsletter, which brings together the best of our leaders, columns, gas essays and reader correspondence. Catch all the business news, market news, news reports and latest news updates on Live Mint. Download the Mint News app to get daily market updates. More Topics #AI Read Next Story