Content Editor, Dunham | 2025 ThinkAdvisor Luminary Award Winner | 2026 Wealthies Finalist — Thought Leader of the Year | Macroeconomics, markets, geopolitics & global trends
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The AI Capex Boom Has Already Outspent Every Megaproject in History
The Big Five hyperscalers are projected to spend more than $600 billion on AI infrastructure in 2026 alone, pushing this buildout past every megaproject in modern history.
What started as equity-funded tech spending has quietly become a leveraged credit binge, with debt issuance running more than 6x the prior five-year average.
What you need to know:
The AI buildout has eclipsed every megaproject in history as firms pour in capital while depleting free cash flows and increasingly using debt.
Why it matters:
Firms are spending an ungodly amount of capital during this AI boom - making it the largest capex cycle ever recorded. That's fueling demand for energy, commodities, and construction, keeping prices and growth elevated. But the expansion is increasingly debt-financed - and that's a recipe for future fragility.
alone, roughly 40% above 2025 levels. A surge that condensed should give anyone pause. Historically, rapid injections of investment at this scale end the same way – like they say, the bigger the boom, the bigger the bust.
Amazon is projected to go negative on free cash flow- somewhere between $17 billion and $28 billion in the red. Alphabet's Q1 free cash flow fell 46% year-over-year as capex more than doubled. Even at Microsoft, estimates show free cash flow plunging.
Alphabet sold a 100-year century bond - the first by a tech company since Motorola in 1997 - as part of a $32 billion offering. Amazon raised $54 billion in March alone. Bank of America forecasts hyperscaler debt issuance hits $175 billion in 2026, more than 6x the prior five-year annual average.
And the analysts are divided.
Bulls say cloud revenue backlogs justify it (Alphabet's Google Cloud backlog alone exceeds $460 billion). But the bears say no ROI has materialized and that excessive building will squeeze margins (way too many data centers competing with one another).
Both have a point.
Time will tell how this plays out. But I have a hunch it’ll get uglier before it’s over.
Figure 1: Ronald-Peter Stoeferle, CMT,, May 2026
The 1970s Called. It Wants Its Inflation Back.
The April CPI just hit 3.8% — the highest in three years — driven by a 30% surge in gas prices and an oil shock that's now bleeding into everything from beef to services.
Markets have gone from pricing multiple rate cuts in 2026 to nearly a coin-flip on rate hikes before year-end — and Fed futures show zero chance of relief through 2027.
The COVID inflation wave was supposed to be over. Before the late-February U.S.-Israeli strikes on Iran, inflation had eased all the way back to 2.4%. Now an oil shock is doing what oil shocks always do - it's bleeding into everything.
The CPI rose 3.8% year-over-year in April - the highest since May 2023 - with gas prices up ~30% and beef prices up nearly 15%. Energy alone now accounts for more than 40% of the total CPI gain – a big change from earlier in the year when tariffs were the primary culprit and the CPI was falling.
The Fed is now caught in the same trap Paul Volcker (then Fed chair) inherited in 1979.
To put this into context, just weeks ago, traders were confidently pricing multiple cuts in 2026. Now they’re pricing in almost a 40% chance of hikes.
But here's the irony that seems to keep repeating itself.
It always comes back to oil (and seemingly Iran?)
The 1973 Arab oil embargo ignited the first inflation surge - a lost decade of purchasing power with the dollar losing roughly a ~35% of its value before things finally peaked after the 1979 Iranian Revolution
Meanwhile, the 2022 inflation wave really amplified the moment Russian oil was sanctioned off global markets due to the Ukraine war.
And now, a war closing the Strait of Hormuz is sparking an inflation fight the world thought it had already won.
Different decade. Different conflict. Same commodity. Same result.
As the chart via Apollo shows you, the parallel between post-2014 and the 1970s isn't perfect. But it's close enough to take seriously.
Maybe the inflation beast was never slayed - just playing possum.
Figure 1: Apollo Academy, May 2026
Is China’s Rare Earth Monopoly the Biggest Geopolitical Risk Right Now?
China controls 90% of global rare earth processing - meaning even ore mined in the West often ends up in Chinese facilities before it's usable.
The U.S. is rushing to build a strategic minerals reserve (Project Vault), but stockpiling raw ore you can't refine domestically isn't independence - it's just moving the dependency upstream.
Oil defined geopolitical power in the 20th century – but rare earths are taking their place in the 21st. And right now, one country (China) holds the chokepoint - with both the reserves and the refining infrastructure to squeeze anyone it wants, whenever it wants.
The Deep Dive:
This may be one of the biggest macro and geopolitical stories we've seen in decades - and most people still aren't paying close enough attention to it.
I’m talking about China’s grip on rare earths and critical metals.
These are the exotic metals and minerals inside almost every modern device and weapon system - the stuff that makes magnets spin, batteries charge, chips compute, missiles lock onto targets, etc.
Think of it as the oil of the future. Except unlike oil - where dozens of countries produce meaningful supply – China has a monopoly on them.
And Beijing has spent decades making sure it stays that way.
Many analysts focus on onshoring mining to protect domestic industries from potential Chinese quotas.
But despite the name, “rare earths” aren’t actually that rare. Many countries have deposits and already mine them. The bigger issue is that extraction is messy - with mining leaving toxic waste and few communities wanting them in their backyard.
But here’s the key point - it’s not just about where the minerals are mined - it’s about who processes them.
Meaning - even if ore is pulled out of the ground in Australia or Canada, it often ends up in a Chinese processing facility before it becomes usable (think how we can mine lithium but it must be refined before it can power a battery).
The U.S. won’t stand for this risk in the future. Thus now it’s rushing to catch up.
This is where Project Vault10 comes in - a $12 billion public-private initiative building a strategic reserve across all 60 minerals on the USGS critical list.
Think of it as the strategic oil reserve, but for critical minerals.
However, there are some serious questions to ask. . .
Such as - what exactly is America stockpiling if domestic refining barely exists? A warehouse of imported ore isn’t independent if you can’t refine or process it all.
And of course, there’s the bigger risk the mainstream doesn’t mention.
China could simply flood the market to shake out competition.
See, if Western nations pour billions into new rare earth projects, Beijing has the scale and state backing to crater prices and make competitors uneconomical before they ever ramp up (it ran the same playbook in solar panels11. And it worked).
The rest of the world faces a genuine trilemma:
Move too slowly and stay dependent.
Move too fast and invite Chinese export controls.
Or build successfully and watch China potentially undercut the whole effort on price.
With Trump-Xi talks ongoing, rare earths will play a key role on any deal - or any breakdown.
Expect a full Morning Pour on this soon. There's far too much here to cover in 500 words.
Figure 3: Visual Capitalist, October 2025
Anyway, who knows how this will all play out?
This is just some food for thought as we watch how these trends develop.
We’ll be keeping a close eye on things. Enjoy the rest of your weekend.
Sources:
Fortune— Without AI spending, U.S. corporate investment in equipment would be negative, Pantheon analyst says[const-ins.com]
Introl— Hyperscaler CapEx Hits $600B in 2026: The AI Infrastructure Debt Wave[introl.com]
Fortune— AI tech red flag: Hyperscalers’ capex is outpacing cash flow[fortune.com]
Barron’s — The AI debt deluge hitting bond markets[barron’s]
Reuters— US consumer prices increase further in April[reuters.com]
Business Circle— Markets raise chances for a Fed rate hike following hot inflation report[businesscircle.co]
Mining — Pentagon aims to break China’s rare earth grip with critical minerals plan[mining.com]
NPR— How China came to rule the world of rare earth elements[nprillinois.org]
Financial Times— China flexes trade power with soaring use of export controls [ft.com]
CSIS— Project Vault: A Minerals Security Backstop[csis.org]
OilPrice.com— China's Solar Boom Has Created a Massive Oversupply Problem[thefreelibrary.com]
Disclosures
This communication is general in nature and provided for educational and informational purposes only. It should not be considered or relied upon as legal, tax or investment advice or an investment recommendation, or as a substitute for legal or tax counsel. Any investment products or services named herein are for illustrative purposes only and should not be considered an offer to buy or sell, or an investment recommendation for, any specific security, strategy or investment product or service. Always consult a qualified professional or your own independent financial professional for personalized advice or investment recommendations tailored to your specific goals, individual situation, and risk tolerance. All examples are hypothetical and are for illustrative purposes only.
Information contained in the materials included is believed to be from reliable sources, but no representations or guarantees are made as to the accuracy or completeness of information. This document is provided for information purposes only and should not be considered as investment advice.
Dunham & Associates Investment Counsel, Inc. is a Registered Investment Adviser and Broker/Dealer. Member FINRA/SIPC. Advisory services and securities offered through Dunham & Associates Investment Counsel, Inc.
