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Financial Markets & Risk Dynamics
July 09, 2026
A Slower AI Payoff Would Be Everyone's Problem
About the Author
Torsten<br>Slok
Partner, Chief Economist
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Consensus expects free cash flow for the hyperscalers to more than double over the coming years, see the first chart below.<br>But what if the payoff takes longer than consensus assumes? That question is particularly pressing given that token prices continue to decline and Chinese models are gaining ground, both in their share of the world's most-used models and in token usage, where they now lead their US counterparts among the top 20 models, see the second and third charts.<br>If Chinese models keep gaining and token prices keep falling, the hyperscaler cash flows expected may prove too optimistic.<br>What are the consequences if the AI payoff comes slower than expected in the first chart?<br>1) Cash flows and earnings disappoint : the projected free cash flow surge slips later while committed capex and heavy depreciation hit on schedule, squeezing margins and marking down the forecast in the first chart.<br>2) A Mag 7 sell-off that takes the market with it : equity prices built on a fast payoff re-rate, and because the Magnificent 7 now account for so much of the indices, the pain can't stay contained, it spreads to chips,...