Mike's Notes
Gary Marcus's latest post in Marcus on AI referred to an article on X by Peter Berezin, Chief Economist & Head of CoreMacro. The full report is behind a client-only firewall.
Also, links to some of Ed D'Agostino's recent articles from Global Macro Update on college and healthcare costs.
Plus an essay from James Miller and a video interview with Ray Dalio.
AI, healthcare and education are good things for humanity. Private equity greed wrecks everything it touches.
In summary, hype, bloat, and waste. And now there is a big bubble and growing mountains of debt. Why?
Resources
- https://garymarcus.substack.com/p/data-center-madness
- https://x.com/PeterBerezinBCA/status/2090766636852641981
- https://www.bcaresearch.com/reports/chief-economists-view-give-me-chastity-not-yet-19-08-2026/224466
- https://www.bcaresearch.com/reports/chief-economists-view-late-cycle-dynamics-23-07-2026/222526
- https://www.mauldineconomics.com/global-macro-update/is-college-worth-it
- https://www.mauldineconomics.com/global-macro-update/healthcare-what-a-mess
- https://www.mauldineconomics.com/global-macro-update/healthcare-pt-2-show-me-the-incentive
- https://jmiller803.substack.com/p/credit-and-the-socialization-of-capital
- https://youtu.be/Bu0xNDLNORU?si=ry6sVsU9MNEcu-WM
References
- Reference
Repository
- Home > Ajabbi Research > Library > Subscriptions > Global Macro Update
- Home > Ajabbi Research > Library > Subscriptions > Marcus on AI
- Home > Handbook >
Last Updated
22/08/2026
Chief Economist’s View: Give Me Chastity But Not Yet
Chief Economist & Head of CoreMacro. Peter is BCA's Chief Economist & Head of CoreMacro.
He lead's firm's efforts to analyze global macroeconomic trends and their implications for financial markets. He also designed the firm's Equity Analyzer platform and its state-of-the-art quant model, MacroQuant.
Before joining BCA in 2010, Peter was a Senior Global Economist with Goldman Sachs. He began his career at the International Monetary Fund in program negotiations, surveillance, and research. He also helped produce the IMF’s flagship report, the World Economic Outlook.
Peter holds a Bachelor of Arts in Economics from McMaster University, a Master of Science from the London School of Economics, and a PhD in Economics from the University of Toronto.
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$10 Trillion In Annual AI Revenue May Be Necessary To Monetize All The Capex Being Plowed Into Data Centers
Hyperscaler capex is expected to reach $1 trillion in 2027, most of which will be AI-related. Let us assume that a capex bust is avoided and capital spending remains at $1 trillion. Let us also assume a blended depreciation rate of 13%, which is roughly what the hyperscalers are currently assuming.
In steady state, the gross value of hyperscaler assets will then converge to 1/0.13=$7.7 trillion, with $1 trillion in annual depreciation expense. Using a straight-line depreciation approach, the net stock of hyperscaler assets will settle at about 0.5*7.7=$3.8 trillion.
The hyperscalers currently enjoy a pre-tax return on invested capital of 30%-50%. Just to steelman the argument, let us use the lower end of that range. In that case, they would need to generate 0.3*3.8=$1.2 trillion in annual EBIT, implying 1+1.2=$2.2 trillion in EBITDA.
Analysts expect the EBITDA margins for the hyperscalers to rise to around 50% by the end of the decade. If they were to achieve this, they would need to generate 2.2/0.5=$4.3 trillion in annual revenue. That is $526 for every man, woman, and child on Earth. However, if EBITDA margins were to fall back to 30%, which is what they were in recent years, the required revenue would rise to 2.2/0.3=$7.2 trillion.
Keep in mind that the foregoing calculation does not even include revenue from SpaceX, the neoclouds, or Chinese AI companies. If one were to include those companies and others, we are potentially talking about AI needing to generate $10 trillion in annual sales to justify all the capex being thrown at it.
For reference, global spending on food (including restaurants) is around $10 trillion. Health care is about the same amount. The entire global software market is only $1.4 trillion.
Clients can read the rest of the report here:
https://www.bcaresearch.com/reports/chief-economists-view-give-me-chastity-not-yet-19-08-2026/224466
Will Hyperscaler EBITDA Margins Continue To Rise?
Executive Summary
Top Takeaway: Wall Street analysts expect record-high earnings growth on top of record-high profit margins. While stocks could rise into year-end, the longer-term outlook for equities is unfavorable.
- AI companies may need to generate $10 trillion per year in revenue to justify the capex that is being plowed into data centers. This is roughly equivalent to annual global spending on food or healthcare.
- Fortunately for the AI trade, hardware shortages remain acute. As such, while the risks to stocks are tilted to the downside over a 12-month horizon, it is too early to tactically position for a bear market.
- I would turn structurally more bullish on stocks if productivity growth were to accelerate. However, with US productivity growth clocking in at close to the 10-year average in Q2, so far there is little evidence of that.
- One reason that oil prices have fallen from their peak is that rising crack spreads have reduced the demand for crude. That is not a particularly encouraging sign for the global economy.
- Kevin Warsh's unwillingness to discuss the Fed's reaction function has increased uncertainty over the rates outlook, lifting bond yields in the process. Against the backdrop of a tightening labor market, yields are unlikely to fall much over the coming months.
- By itself, the recent intervention to support the yen will probably be insufficient. More fundamental factors such as lower oil prices or weaker global growth will be necessary.
- That said, the yen is extremely cheap by conventional valuation measures and has weakened more than one would have predicted based on changes in interest rate differentials. Thus, the long-term upside potential for the currency is large.
