With U.S. tech stocks melting higher, the bulls are clearly “winning.” Two forces are driving this revival in sentiment. First, revenues across the AI ecosystem have surged, which seems to contradict the bears’ worries about data-center profitability. Second, we are seeing extremely strong demand for compute, which helps to alleviate investors’ worries about “overinvestment.”
From our perspective, however, the debate about the sustainability of AI capex hasn’t been settled. Far from it. That’s because what we are seeing now is still largely just the result of revenue recycling, rather than the entry of new funds from outside the AI ecosystem.
To illustrate: This year the hyperscalers are set to spend around $700 billion on data centers. That is a huge sum. Not only does it directly boost the revenues of the companies that provide the infrastructure, but the hyperscalers are also booking revenues from the recycling of those investments, either as order backlogs (“commitments” from the likes of OpenAI) or as “other revenues” (derived from the hyperscalers taking an equity stake in their customers and then recording large capital gains).
Meanwhile, it is the model developers and the hyperscalers that are still driving much of the increase in demand for compute, as they put those massive AI investments to work. This whole ecosystem is massively circular; and while those circular dynamics clearly have a lot of momentum, that, in itself, isn’t enough for medium-term sustainability. For AI capex to be sustainable over the medium term, there needs to be a much larger share of revenue (and compute demand) from outside the ecosystem, particularly from business and consumer demand. Capex recycling isn’t enough.
~ Dario Perkins, "The AI capex debate—who is right?," Macro Picture/TS Lombard, May 21, 2026
