The $1.8 Trillion Off-Balance Sheet Time Bomb At The Heart Of The AI Supercycle

Yesterday Goldman raised numerous eyebrows across Wall Street with a new report in which it stated that "consensus 2027 hyperscaler capex estimates are too conservative." According to Goldman's Ryan Hammond, analyst estimates imply hyperscaler capex will equal $920 billion in 2027, representing a sharp deceleration in growth from 84% in 2026 to 22% in 2027. Goldman disagrees, and estimates that if incremental investment reaches 2-3% of GDP, similar to the build-out of railroads and autos, hyperscaler capex would reach roughly $1.1 trillion in 2027 (45% growth). But that's just the start: in a more extreme upside scenario, Goldman calculates that between hyperscaler cash flow generation and investment grade credit market capacity, there is room for potentially $1.4 trillion in capex (89% growth).

Yet as Goldman also pointed out in the same report, this massive spending increase - which is based on the premise that the LLM sponsors of the AI revolution such as Anthropic and ChatGPT will be able to keep rising token prices indefinitely even though they are already getting substantial pushback from corporations which are increasingly looking toward much cheaper offerings from China as the WSJ reported - will soak up virtually all of hyperscaler cash from operations by the end of 2026...