The Big AI Capex Debate

While AI capex has reached historic levels and boosted tech stocks, 85% of industry revenue is currently derived from circular financing within the AI ecosystem. The long-term sustainability of this boom depends on genuine productivity gains realized by external sectors, which are not yet evident.

Key Takeaways

• 1.The current AI capex boom is of historic proportions, set to surpass Railway Mania as the largest infrastructure project in US history.
• 2.Approximately 85% of AI ecosystem revenues and compute demand are driven by internal 'capex recycling' among hyperscalers and model developers.
• 3.Sustainability of the boom depends on 'outer loop' revenue from external consumers and businesses paying for genuine productivity gains, which remains unproven.

Table of Contents

• AN HISTORIC BOOM
• BULL VS BEAR
• CIRCULARITY STILL RULES
• 1. AN HISTORIC BOOM
• What is the impact on the global economy?
• 2. BULL VS BEAR
• What is the bear case for the AI boom?
• Other risks and uncertainties
• Why has the mood changed in 2026? What is the bull case for AI?
• 3. CIRCULARITY STILL RULES
• Who is right – the bears or the bulls?
• Will AI boost productivity? Why is this so important?
• What are the implications for financial markets?
• Bottom line

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