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Happy middle of your work week…
Today, we explore AI’s trillion-dollar spending spree.
Hit reply and let us know what you think (we read all of your kind words).
Coffee at the ready…
The Big Sip
The take: The AI spending race has an $800 billion problem: nobody's figured out how to pay for it.
What happened: IBM CEO Arvind Krishna told The Verge's Decoder podcast that the industry's planned 100 gigawatts of AI data centers would cost $8 trillion. And require $800 billion in annual profit to cover interest.
Why it matters: The Bank of England just warned that this debt-fueled AI boom could unravel, with "materially stretched" stock valuations and early stress signals already showing up in credit markets.
What to watch: Whether any hyperscaler blinks first—the first company to slow spending could trigger a broader reassessment of what all this infrastructure is actually worth.
Google wants to build data centres in space.
Sponsor Break
Before we slurp into today’s brew…
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Here’s Your Brew
IBM's Krishna's point: the capital structure doesn't work.
The math is simple.
One gigawatt of data center capacity costs roughly $80 billion to build and equip. Big Tech has announced plans for 100 gigawatts.
A caffeinated bomb of $8 trillion in commitments.
To service the debt on that sum, you'd need $800 billion in annual profit—more than Amazon, Apple, Microsoft, and Alphabet made combined last year.
AI chips depreciate on a five-year cycle. After that, you rip out the racks and start again.
Nvidia releases new chips every 12-18 months. The hardware goes stale faster than the spreadsheets assume.
OpenAI's Sam Altman believes the spending will pay off.
Krishna's response: "That's a belief."
Not a business plan.
Even OpenAI co-founder Ilya Sutskever has declared the "age of scaling" over.
If the people who built this thing are hedging, maybe the people financing it should, too.
Two Sides, One Mug
Bull case: AI demand is real, cloud revenue is up 20-40% at the hyperscalers, and they're monetizing capacity as fast as they build it.
Bear case: Depreciation schedules are fantasy; companies are booking five-year lives on chips that last three, inflating earnings by as much as 27%.
Our read: The spending is terrifying. Nobody wants to be the one who stops first.
Receipt of the Day
Bank of England Financial Stability Report — December 2025
"Deeper links between AI firms and credit markets, and increasing interconnections between those firms, mean that, should an asset price correction occur, losses on lending could increase financial stability risks."
Why it matters: When a central bank starts warning about AI debt contagion, the spreadsheet optimism has an expiry date.
Spit Take
$800 billion in profit just to pay interest on AI spending. [Business Insider]
Your Coffee Break Links (and water cooler chatter)
Ilya Sutskever says the "age of scaling" is over — The OpenAI co-founder's first major interview since leaving. "Even 100x more compute wouldn't be completely transformative." Read it before the next funding round. Dwarkesh Patel
Burry vs Nvidia: The Thanksgiving grudge match — The Big Short investor is publicly arguing that Nvidia customers are cooking their books. Nvidia sent a seven-page memo to Wall Street to push back. Burry's response: "I'm not calling you Enron. I'm calling you Cisco." TechCrunch
Marc Benioff calls AGI hype "hypnosis" — The Salesforce CEO is all-in on AI but deeply sceptical of anyone who uses the letters A-G-I. "It's not a person, and it's not intelligent, and it's not conscious." Meanwhile, he's cut 4,000 support staff. Business Insider.
Join your team of caffeinated skeptics.
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Mugshot Poll 📊
When does the AI capex slowdown begin?
You can read yesterday’s newsletter on El Chapo’s son here.
For the love of coffee, see you tomorrow!
Enjoy your Wednesday, keep it caffeinated.
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