So Who's Going to Buy All These Tokens? - Horse Energy

Every AI bear case you've read is a bet against the technology. The models are overhyped, the agents don't work, the pilots quietly die. Ed Zitron has built a whole beat on it.

This piece makes the opposite bet. Assume the models work. Assume they keep getting better. Assume every demo ships. The problem isn't the technology. It's the customer's math: all this spending only makes sense if somebody buys roughly $1.2 trillion of tokens a year, climbing toward $2.5 trillion by 2031.

So who's the buyer? And do they ever get their money back?

Short answer: the buyer is payroll, and no.

And you won't have to wait a decade of productivity statistics to check my work. It shows up first in one place: hiring. What hiring already shows is the bad version: so-so automation, jobs traded for tokens with the dividend still missing.

The tab

Let's try to get a grasp of the size of this whole boondoggle. Start with what's being spent. Goldman Sachs models AI capex[1] at $765 billion this year, rising to $1.6 trillion a year by 2031; that's $7.6 trillion all in. Obviously that's a projection, not a promise, but company guidance is in the same neighborhood. Microsoft[2] is guiding to about $175 billion of reported capex this year (roughly $190 billion before a lease-accounting change), Meta[3] to $130–145 billion, Amazon[4] to about $220 billion, and Alphabet[5] to $195–205 billion. That's roughly $733 billion for the four of them at the midpoints, or call it $748 billion on Microsoft's old basis. Oracle[6] runs on its own fiscal calendar, but its next-year indication works out to as much as $95 billion gross[7]. Stack them all and you're in the $830–840 billion range, with the caveat that the fiscal periods and definitions don't line up perfectly.

It's not spread evenly. Oracle just finished a fiscal year spending $55.7 billion on capex against $67.4 billion of revenue[6]. That's 83 cents of every dollar it brought in. The big four are nowhere near that, but they're all at levels that would have looked insane five years ago.

2026 Capital Expenditure Guidance, by Company

Capex is single-year guidance as disclosed by each company; fiscal periods and definitions vary, and ranges are shown at their stated midpoint. None of the five gives forward free-cash-flow guidance, so the second series shows what each actually reported most recently[2][6][8][41][42]: full fiscal-year totals for Microsoft (FY26, ended June 2026) and Oracle (FY26, ended May 2026), trailing twelve months through the most recent quarter for Meta, Amazon, and Alphabet.

Can cash flow cover this? Not really. Alphabet, the best case, generated $53 billion of free cash flow over the past year even after $132 billion of capex[8]. Oracle just ran a fiscal year about $24 billion free-cash-flow negative[6]. Sector-wide, the Bank of England estimates the buildout needs roughly $1.5 trillion of outside money[9] under current plans, including about $800 billion from private credit (a forward-looking estimate for the whole sector, refreshed this July[10], not a claim that every checkbook is empty). Some of it is plain debt; a lot of it is leases, capacity deals, and private-credit structures.

Without getting a CPA involved, let's do some quick payback math. AI chips don't earn forever. Alphabet books its servers over about six years[11], but a chip can stop earning premium rates long before the accounting says so[12]: the next generation shows up and undercuts it. And once you're buying new hardware every single year, the question stops being "when does this batch pay off" and becomes "what does the whole machine need to earn, every year." That's just annual capex divided by the margin on compute. Say the sellers keep 65 cents of each revenue dollar after the direct cost of serving it. That number is my assumption; move it if you want, I don't care. The $765 billion of capex spend needs about $1.18 trillion of revenue a year just to cover the hardware. We're talking about practice, not the game, practice. That's before salaries, buildings, interest, or a single dollar of return for anyone. At 2031's spending rate, the number is about $2.5 trillion. So who is going to spend that?

The Hardware Alone Needs a Trillion-Dollar Customer

Annual capex versus revenue required to cover just the hardware, assuming sellers keep 65¢ of every compute revenue dollar after direct serving costs (author's assumption; move it and the hurdle moves).

So What's the Demand Story Today?

It's complicated. A lot of today's "demand" is the supply side buying from itself. Microsoft's money flows to OpenAI, and OpenAI's compute runs on Microsoft's cloud[13], and the FTC found these partnerships came with requirements to spend big chunks of the investment right back on the partner's cloud[14]. Amazon has put $8 billion into Anthropic[15], Google another $2.55 billion[16], and Anthropic buys enormous amounts of compute from...