Remember, the industry is spending over $30 billion a month (approximately $400 billion for 2025) and only receiving a bit more than a billion a month back in revenue. The mismatch is astonishing, and this ignores that in 2026, hundreds of billions of additional datacenters will get built, all needing additional revenue to justify their existence. Adding the two years together, and using the math from my prior post, you’d need approximately $1 trillion in revenue to hit break even, and many trillions more to earn an acceptable return on this spend. Remember again, that revenue is currently running at around $15 to $20 billion today.
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What would this look like in real time?? If you think back to the fiber-optic bubble of 2000, the warning signs were obvious. When the capex spending started to outstrip the desire of investors to fund it, the vendors started to act in irrational ways in order to hit Wall Street targets. Lucent and Nortel started lending their customers money to buy networking equipment, they took equity stakes in their customers, so that they could purchase more equipment, and they even bought capacity on their customers’ fiber-optic networks so that their customers could show revenue growth, and hit Wall Street targets. All of this was done in the hope that their customers could raise more capital to keep buying networking equipment. As you can imagine, when you’re the vendor, the customer and the investor in a company, there’s a strong incentive to artificially inflate the numbers by signing preferable contracts that use very large numbers, and then round-trip the capital. With extreme pressure to hit targets, especially as the funding cut off, it should be no surprise that this led to endemic fraud at both Lucent and Nortel, ultimately leading to their collapse.
Knowing my financial history, and the fact that these things tend to rhyme, I’ve been somewhat mesmerized by the recent spate of announcements amongst a handful of companies that seem to be simultaneously buying, selling and investing in each other.