Google’s parent company, Alphabet, just reported its first-ever $100 billion revenue quarter, a milestone fueled by “growing demand for its AI infrastructure.” This massive cash flow is a key driver of the $3 trillion global spending spree on AI datacenters, and it’s what separates the “healthy” boom from the “speculative” bubble.
Alphabet, along with Amazon, Meta, and Microsoft, is a “hyperscaler.” These four companies are set to spend an “incredible” $750bn on AI capital expenditure in the next two years. Their spending is backed by real profits and existing, massive cloud businesses.
This $750bn is considered the “healthy” part of the boom. When Microsoft builds a datacenter in Newport, Wales, it’s a “general purpose” facility that can run AI, email, or Zoom. This provides a safe floor for their investment.
The problem, analysts say, is the $1.5tn “funding gap” left over. This part of the boom is not funded by $100bn quarters, but by “private credit” from “shadow banking.” These lenders are funding “speculative assets” with “no customers,” creating “structural risk” for the global economy.
Alphabet’s $100bn quarter proves the AI demand is real for the top players. But it has also inspired a “debt-fueled exuberance” among smaller, “unproven” players. The risk is that the “speculative” bubble will burst and damage the “healthy” boom in the process.
