{"id":4578,"date":"2026-07-29T04:42:15","date_gmt":"2026-07-29T04:42:15","guid":{"rendered":"https:\/\/silvybrand.com\/?p=4578"},"modified":"2026-07-29T04:42:15","modified_gmt":"2026-07-29T04:42:15","slug":"ai-stock-fall-google-capex","status":"publish","type":"post","link":"https:\/\/silvybrand.com\/?p=4578","title":{"rendered":"AI\u2019s finally expensive enough to make Wall Street nervous"},"content":{"rendered":"


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It\u2019s earnings season, and investors got an unpleasant surprise from Google: an increase on its spending estimate<\/a>, to as much as $205 billion \u2014 from the last quarter\u2019s projection of up to $190 billion. Even the lower end of Google\u2019s new projected range \u2014 $195 billion \u2014 is much more than the company had previously forecast as its top end<\/em> spending. Now, look, I recognize that there\u2019s an impulse to say things like \u201cWhat\u2019s $15 billion between friends?\u201d but from an investor\u2019s perspective, Google has essentially said that it can\u2019t accurately forecast its costs, which is a scary thing. Plus, Google is spending more money than it\u2019s making<\/a>. And<\/em> Google is also facing competitive pressures from Chinese AI tools, as well as pricing pressure to keep the cost of its models low.<\/p>\n<\/div>\n

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You don\u2019t have to be a finance genius to figure out that spending more than you make isn\u2019t an ideal business practice. What\u2019s more, increased<\/em> spending in an environment where you have to either keep your prices static or drop<\/em> them doesn\u2019t bode well. You\u2019re spending more and getting the same amount back, or \u2014 worse \u2014 spending more for less<\/em> revenue.<\/p>\n<\/div>\n

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\u201cA reminder of funding strain in the AI build-out\u201d<\/p>\n<\/div>\n<\/div>\n

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These pressures aren\u2019t just on Google. They\u2019re on the entire AI ecosystem<\/a>. Meta, Amazon, and Microsoft will all report their earnings this week, and there are plenty of people who think they will also<\/em> announce they are spending more than expected<\/a> on the data center buildout.<\/p>\n<\/div>\n

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There are a few other things happening at the same time that suggest investors are getting nervous. First of all, people seem to have finally noticed that SpaceX sucks<\/a>; as of this writing, its shares are worth almost half as much as they were during its peak. Second, investors are nervous about Oracle\u2019s data center buildout debt<\/a>, and it\u2019s worth keeping in mind that Oracle is the public market\u2019s stand-in for OpenAI. Third, Nvidia has been engaging in rounds of deal talks worth a combined three-quarters of a trillion dollars<\/em>. Nvidia \u2014 even more so than OpenAI \u2014 is at the center of the circular financing<\/a> in the AI ecosystem. If it is pumping more money into supporting the AI buildout, that may be an indication that the actual demand is weaker than expected.<\/p>\n<\/div>\n

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Specifically, Nvidia guaranteeing OpenAI\u2019s debt, a deal worth $250 billion, is \u201cas much a reminder of funding strain in the AI build-out as it is a demand signal,\u201d Billy Leung, Global X Management\u2019s tech sector investment strategist, told Bloomberg<\/em><\/a>.<\/p>\n<\/div>\n

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On top of all that, a Chinese startup released a new model<\/a>, and people get nervous every time that happens<\/a>. One reason for that nervousness is that China\u2019s biggest constraint<\/a> is that they \u2014 at least theoretically<\/a> \u2014 don\u2019t have the same kind of access to GPUs as US companies, and yet their AI systems are still competitive. If that is indeed what is happening, there\u2019s an end in sight to Nvidia\u2019s (and other chipmakers\u2019) cash bonanza. What\u2019s more, it may mean that companies are building too many data centers.<\/p>\n<\/div>\n

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I\u2019ve spoken to a lot of smart people who are more optimistic than I am about the AI boom. (I have been asking how AI companies plan to actually make money<\/a> for three years now, and I still have not received a satisfactory answer.) All of them think we will likely overbuild data centers during this period of exuberance. They also think that a lot of AI companies will die off when the inevitable correction comes. They are invested in the space anyway because they think the companies that survive will make them more money than they will lose on the ones that die off.<\/p>\n<\/div>\n

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So the AI boosters are watching for the market top just like everyone else; they know it\u2019s inevitable. It\u2019s hard to figure out what the market top is in advance, of course. But some investors are clearly starting to get cold feet<\/a> about the whole AI thing, and they\u2019re moving their money elsewhere.<\/p>\n<\/div>\n

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We may very well get earnings from the other big tech companies that reassure investors, and this period of AI anxiety will pass. On the other hand, if you\u2019re looking for top signals, Elon Musk<\/a> is a pretty good one<\/a>, and SpaceX did<\/em> just go public. Best of luck to all of us, I guess!<\/p>\n<\/div>\n

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