1 min read
The market is correct in the moment to voice concerns about how the rising cost of capital will impact hyperscalers’ financial statements in 2027.
That is because hyperscalers such as Oracle (ORCL) and Google (GOOG, GOOGL) will need fresh debt to fuel their AI infrastructure builds, with free cash flow likely going negative.
JPMorgan strategist Mislav Matejka captured the situation perfectly in the two new charts below.
Hyperscaler free cash flow is forecast to turn negative in 2027, which implies that funding from credit markets is likely to drive more of the AI build-out going forward.
Current consensus estimates for hyperscaler capital expenditures in 2027 are already climbing from levels experts believe are now too low.
Morgan Stanley sees $1.6 trillion in total 2027 capital expenditures among the hyperscalers, up from $978 billion estimated for this year.
“The use cases are accelerating and we see it in the field every day and the capex dollars will be in the trillions with a massive ripple impact across the economy,” Yorkville Ives partner Dan Ives says. “We expect over 1,000 datacenters to be built over the next few years as this next phase of the AI Revolution is set to get built out.”
Brian Sozzi is Yahoo Finance’s Executive Editor, host of the Sozzi Unleashed morning show and the Power Players with Brian Sozzi podcast, and a member of Yahoo Finance’s editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.
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