I run the numbers on hyperscaler AI capex and the math is not going to work out.

With these assumptions:

– Big 4 keep spending at current pace for 3 more years

– Returns only start showing after aprox 2 years

– Heavy competition with around 20% operating margin on AI and Cloud

– Use of 9% cost of capital

This is the current reality:

AWS aprox $142B/yr

Azure aprox $132B/yr

Google Cloud around $71B/yr

Combined its about $330B to $340B annual cloud revenue today

And lets says Global public cloud market of $700B total today.

To justify the current capex trajectory under those assumptions, by year 3 the big hyperscalers would need roughly $800B to $900B in new annual revenue just to earn a normal return on the capital being deployed.

That implies combined hyperscaler cloud and AI revenue going from: $330B today to $1.2T within 3 years :-))

In other words...Cloud would need to roughly do 4× in a very short window, and the incremental revenue alone would exceed the entire current global cloud market.

So for the investment wave to make financial sense, at least one of these must be true:

1 Cloud/AI spending globally explodes far beyond all prior forecasts

2 AI massively increases revenue/profit in ads, software, commerce and not just cloud

3 A winner takes all outcome where only 1 or 2 players earn real returns

4 Or a large share of this capex never earns an economic return and is defensive

People keep modeling this like normal cloud growth. But what we have is insanity

> That implies combined hyperscaler cloud and AI revenue going from: $330B today to $1.2T within 3 years :-))

You’re ignoring the fact that gaming is going to the cloud.

That industry is bigger than Hollywood.

Desktop computers will invariably follow.

The RAM shortage will drive the transition.

For instance, my wife uses her personal laptop about four days a year.

People like that won’t be buying personal desktops or laptops, five years from now. The RAM shortage will drive a transition into thin clients.

I already see it with our kids. They use an iPhone, unless they need to type. Then they use an iPad with a BT keyboard.