July 30, 2026

Analysis of actual Claude usage data shows workers in AI-exposed occupations are experiencing slower wage growth, while employment levels in these occupations remain unchanged, suggesting companies are capturing AI productivity gains through wage compression rather than workforce reduction. This paper was written by Sania Edlich and me using a difference-in-differences methodology with occupation and year fixed effects across 321 matched occupations from 2015 to today. The paper is available here.

July 29, 2026

CDS spreads have started to widen out for names in AI, and the market is asking three fundamental questions: 1) Will the AI capex pay off, and how quickly? With trillions committed to data centers, chips and power up front, the question is whether AI monetization ramps fast enough to clear the cost of capital before the assets depreciate, or whether it's an overbuild whose ROIC never catches up to its WACC on a massive, front-loaded outlay. For more, see also here. 2) How is all of this being financed, and at what spread? Hyperscaler spreads are widening as the buildout is increasingly funded with debt rather than organic free cash flow, and as issuance surges, the question is whether the all-in yield climbs to a level where the marginal data-center dollar no longer clears its return hurdle, forcing the capex cycle to self-throttle. 3) Will there be unlimited demand for compute, or will compute demand peak? The bull case assumes demand is effectively insatiable as inference workloads, agentic systems and new model generations compound, but the risk is that efficiency gains, model commoditization or slower-than-expected enterprise adoption cause demand to plateau well below the capacity now being built, leaving the industry with a glut of expensive, rapidly depreciating infrastructure.

July 28, 2026

Over the past month, the consensus has revised up operating cash flow expectations for hyperscalers over the next five years, see the first chart. However, capex expectations have been revised up even more sharply, see the second chart. As a result, the consensus now expects free cash flow to be materially lower over the same period, see the third chart. The bottom line is that the consensus has over the past month meaningfully increased its near-term hyperscaler capex forecast, reducing expected free cash flow despite stronger operating cash flow forecasts. For investors, the key question remains the speed with which these capex investments will translate into proportional revenue or profit growth, see also here.