Spencer Jakab opens his Heard on the Street column with the only joke available on the subject. After an Anthropic employee put the odds of AI destroying humanity above 10%, the economist Owen Lamont observed that investing in it was “like Robert Oppenheimer doing an IPO for the Manhattan Project in 1945.”
Then Jakab does the sensible thing and sets extinction aside, because it is not a variable you can put in a spreadsheet. What’s left is a market signal that is genuinely interesting.
Read the reaction, not the proposal
When industry leaders floated a coordinated slowdown for safety reasons, the stocks moved in a revealing pattern. Shares of the hyperscalers — Microsoft (MSFT), Alphabet (GOOGL) and Meta Platforms (META) — jumped, on an otherwise awful day for technology. The worst hit were the companies selling them chips, power and infrastructure: Nvidia (NVDA), Micron Technology (MU), CoreWeave (CRWV), Digital Realty Trust (DLR), Corning (GLW).
Think about what that means. Investors rewarded the companies that would spend less and punished the ones that would sell less. That is not how a market reacts to a safety announcement. It is how a market reacts to relief.
Three walls the build-out was already hitting
Power. Data centers are set to reach 12% of total U.S. electricity demand by 2030, according to Rystad Energy. That is the equivalent of somewhere between 30 and 60 nuclear plants of additional capacity. And the politics have turned fast — as Jakab puts it, politicians went from doling out tax breaks to opposing the facilities in a matter of months.
Copper. This is the one that stops the argument. Supplying all the copper to wire the planned data centers would have led to a 25% shortfall of the metal by 2040, per S&P Global. A major new copper mine takes 15 to 20 years to get up and running. You cannot schedule your way around geology.
Money. Having exhausted their own considerable cash flows, the hyperscalers went on a borrowing binge that is starting to worry credit investors. Their share of the leading investment-grade bond index grew 78% in a single year, according to Capital Group.
That last number deserves a moment from anyone who owns a bond index fund. A “diversified” investment-grade bond portfolio now carries substantially more exposure to the AI capital cycle than it did twelve months ago — and nobody sent a notice.
The question the spending has to answer
Ryan Kelley, chief investment officer at Hennessy Funds, asks it in five words: “How is all this going to be monetized?” With open-source competition rising and token prices falling, making enough profit to justify the largest infrastructure splurge in history is, as Jakab notes, a tall order — and two hotly anticipated public offerings are waiting on the answer.
Some investors suspected less noble motives in how quickly chief executives agreed to tap the brakes: a coordinated slowdown trims cash needs while supporting prices, which starts to resemble a technological cartel. Or, more charitably, the executives simply looked at the power, the copper and the borrowing and concluded the plans were never feasible.
Either way, Jakab’s conclusion is the one that matters for a portfolio: the fact that the companies committing their shareholders’ cash rallied on the news suggests investors were already nervous about more than safety. And that is bad news for the companies selling the picks and shovels.