LONDON, - Another blockbuster earnings season has swept Wall Street, powering corporate profits and driving stock indexes back to record highs. But even as the AI investment engine fires on all cylinders, underlying anxiety is still hard to shake. In terms of headline profits, earnings projections and corporate investment, the numbers keep ringing the bell. U.S. annual profit growth has reached 50% at midyear, while overall capital expenditure this year alone is heading north of $1 trillion and rising. A report in Monday's Wall Street Journal claimed that spending among the so-called hyperscalers building data centers and wider AI infrastructure may be $3 trillion higher than reported if off-balance-sheet items such as purchase commitments and unstarted leases are included. Wherever the eventual number lies, hand-wringing among naysayers has focussed on the growing cash burn at firms at the vanguard of the AI race, and the debt and equity financing needed from corporate bond markets, equity markets and private funds. Latest estimatesshow that bond sales by the five main hyperscalers — Amazon, Alphabet, Microsoft , Meta Platforms and Oracle — are set to double this year to $250 billion and almost double again by 2027. Even if you still fret about the fate of the big spenders, chip and equipment makers that recently wobbled after nosebleed-paced stock booms earlier this year are back on the rise. Freed by last week's soft U.S. inflation numbers from fears that the Federal Reserve may cool their jets by raising borrowing costs next month, stock investors are behaving as if all clouds have been banished once again and the only way is up. However, worries persist among many observers and finance officials — chiefly regarding the history of overconfidence, leverage and vertigo in such cycles. There is also a fear that patchy end-use cases mean the technology may never pay off for the megacaps spending such vast sums, as well as concern over how widely those companies' stocks are held. Researchers at the European Central Bank on Monday posted their rather ominous conclusions on how all this may end, saying the timing and extent of a stock reversal were inherently "unknowable" in advance but that a correction was coming regardless. The ECB blog noted that the financial-stability concerns were not confined to America, as U.S. megacaps are widely held by European households, insurers and pension funds. It said a correction was an inevitable feature of such technological revolutions and investment booms, while exposure was amplified by the concentration in giant market valuations and index tracking. All involved needed to be prepared. "Historical experience suggests that technological revolutions carry risks of a boom-bust cycle in asset prices, and this risk does not depend on today’s valuations being rational or irrational," they wrote, metaphorically fastening their safety belts. HUBRIS AND HUMILITY The sort of over-concentration the ECB warned about was
