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July 09, 2026
Partner, Chief Economist
Consensus expects free cash flow for the hyperscalers to more than double over the coming years, see the first chart below.
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.
If Chinese models keep gaining and token prices keep falling, the hyperscaler cash flows expected may prove too optimistic.
What are the consequences if the AI payoff comes slower than expected in the first chart?
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.
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, power, data centers and the S&P 500 as a whole.
3) Balance sheets stretch and credit risk rises: with internal cash unable to cover spending, hyperscalers lean further on debt, raising leverage and inviting possible ratings downgrades if profits lag.
The bottom line is that AI has been the one thing holding up both the economy and markets, and with so much riding on so few names, a slower payoff wouldn't just be a sector problem, it would risk tipping the economy into recession and the S&P 500 into a correction.
Sources: FactSet, Apollo Chief Economist
Sources: OurWorldinData.org, Apollo Chief Economist
Sources: LLM Rankings | OpenRouter, Apollo Chief Economist
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