Corporate America is Levering Up, Households Aren’t
The connections between the AI capital cycle, market leadership, and the household balance sheets underpinning it.
The AI trade is showing up in broad index earnings
While it has been obvious for a while that the AI infrastructure builders have seen through-the-roof earnings growth, it has been less obvious that AI-driven productivity was making its way downstream to the rest of the index (ex-energy).
Still early to say with any certainty, but we are seeing a parallel earnings inflection between those two cohorts thus far in 2026. AI-infrastructure earnings growth has accelerated from 23% in Q3 2025 to 54% in Q2 2026, while the rest of the index inflected too, from 6% to 14%. Is it the start of the growth that we were promised by AI boosters?
Big Tech is set to spend more on capex than it earns in cash
We should be all be hoping that is the case because the leverage in the system is rising. Capex for the hyperscalers ran at 31% of operating cash flow in 2015 and 64% last year. The 2026 estimate is 102%.
This is a significant acceleration and the first year the four will spend more than they generate. Every dollar above that line has to be funded through equity or debt issuance.
