Hyperscaler revenues are artificially inflated by AI
The bear case presented against major tech hyperscalers is that their cloud revenues are artificially boosted by a circular funding loop with unprofitable AI startups.
The argument
The guest argued that Microsoft, Google, and Amazon are funding AI labs like OpenAI and Anthropic, which then immediately spend those funds back on the hyperscalers' cloud infrastructure. This circular flow of capital masks a lack of genuine enterprise demand and poses a severe revenue risk to hyperscalers if the funding stops.
The thesis, stress-tested
✓ What validates it
- ✓Microsoft reporting a material drop in Azure revenue growth or write-downs related to AI clients
- ✓A reduction in capital expenditure guidance from major hyperscalers
▸ Risks discussed
- ▸Hyperscalers successfully transition AI labs to self-sustaining commercial models
- ▸Organic enterprise demand for cloud AI compute accelerates to replace startup spending
Hear it yourself
"only demand for AI compute between Anthropic and OpenAI. Those two companies don't make sense. They don't make economic sense. They're the only way to make them make economic sense is to just ignore your lying eyes. It sucks because I I think that the tech industry is being poisoned with a very specific kind of ideology, and I think the irony is so many of them are atheists, stern, hard rationalists, but they have a quasi religious attachment to artificial intelligence. Every minor sign is proof that the great"
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