The numbers that show we are approaching the top of the AI boom

The numbers that show we are approaching the top of the AI boom

The combined revenue growth for OpenAI and Anthropic appears to be slowing, according to Ohsung Kwon and the folks at Wells Fargo. That’s a problem given that both of them reportedly plan to launch IPOs. The right-hand chart below shows “reported/rumored” combined annual run-rates for both companies. The law of large numbers appears to be kicking in: While growth is still happening “at a fast pace,” Kwon et al. say, the rate of growth is slowing down.

The left-hand chart offers a potential explanation. While token usage is going up, the cost of them has plateaued. One LLM is much like another for 90% of tasks, and it is likely that heavy-user customers are budgeting toward cheaper models accordingly. “Plateauing spend is concerning for frontier labs,” their recent note said.

On top of that, the market is used to large upward revisions to future capex estimates from hyperscalers. If that reverses—if the revisions get smaller—expect tech stocks to sell off. “If capex estimates don't get revised up by more than 10%, we see that as a risk to AI buildout stocks,” he advised clients.

Kwon is not alone. As these charts from Adrian Cox at Deutsche Bank and Lisa Shalett at Morgan Stanley show, estimated capex growth is about to slow down significantly.

Spending will still be a not-shabby $1 trillion per year. But Shalett said in a note, “Current consensus contemplates a different scenario in 2027, featuring significant deceleration in growth rates [and] could prove a headwind to equities next year.”

Europe and US futures rise as semiconductor supplier beats expectations

ASML, the Dutch company that is the only supplier of the “extreme ultraviolet lithography” machines needed to make the most advanced semiconductor chips, reported Q3 profits that beat expectations and said it had customers interested in placing orders through 2030.

S&P 500 futures were up 0.21% this morning. The index closed flat on Tuesday. In Europe, the Stoxx 600 was up 0.48% in early trading, and the U.K.’s FTSE 100 was up 0.22% before lunch. Asia: South Korea’s KOSPI was down 0.44%. Japan’s Nikkei 225 was down 0.05%. India’s Nifty 50 was down 0.46%. China’s CSI 300 was down 1.36%. Brent crude was $106 per barrel. Bitcoin was at $83,330.

French bond market tracks US debt trajectory

A lot of eyes are on the French bond market right now as Paris struggles to deal with its national debt. Yesterday we told you Macquarie was pondering whether there might be bank runs in France if the Élysée Palace can't get things under control. And tomorrow ING will host a seminar whose title says it all: “Is France pushing the eurozone into a new sovereign debt crisis?”

But as this chart from Claudio Irigoyen and Antonio Gabriel at Bank of America shows, the French 10-year bond and the U.S. 10-year are basically on the same track.

They got there because they have the same problem: “When interest rates are low, governments have incentives to run bigger deficits financed with cheap debt, especially when the cost of financing is lower than the rate of growth of the economy,” they said in a note. “However, if that ‘cheap’ debt goes to finance a structural increase of the fiscal deficit, when interest rates increase it is politically difficult to implement the necessary fiscal consolidation to put the house in order.”