Stock markets are mixed in early trading. Crude oil, gold, and silver are all modestly higher, while the dollar is dipping.
Are the astronomical capex totals being reported for AI infrastructure not astronomical ENOUGH? That’s what this eye-opening Wall Street Journal article suggests. The media outlet tallied an additional $3 trillion in off balance sheet obligations, including at firms like Meta Platforms Inc. (META), Alphabet Inc. (GOOGL), and Microsoft Corp. (MSFT).
META, GOOGL, MSFT (YTD % Change)
Source: TradingView
The additional financial obligations include things like promises to purchase chips and energy supplies down the road, future lease payments, and more. Bulls maintain the revenue and profits generated in the future will more than make up for the capex dollars being spent today. Bears contend that Big Tech companies are already cash flow negative due to on-balance-sheet costs; adding in trillions in possible future obligations makes the outlook grimmer.
That’s not stopping companies from making aggressive moves in the AI space, though. The payment processing firm Stripe Inc. said it would buy OpenRouter Inc. for $7 billion. The startup helps clients rout AI tasks to the most-efficient and affordable AI models among the hundreds it has access to. Ironically, the firm’s CEO Alex Atallah had described his company as the “AI equivalent of Stripe” in the past. Both firms are privately held.
Finally, investors continue to keep a wary eye on bonds amid elevated inflation and a global rate-hiking cycle that shows no sign of letting up. Bloomberg tracks 32 different interest rate swap markets globally, and roughly two-thirds are pricing in expected rate increases over the coming year. The greatest monetary policy tightening is expected in Asia. The iShares 20+ Year Treasury Bond ETF (TLT) has lost 6.6% this year and 44.7% over the last half-decade.
