2026 has seen US tech giants throwing enough capex at AI infrastructure to fund a small country. Amazon has guided capex that is roughly half of South Africa's entire GDP!

But with fracture lines appearing in the AI landscape, is the ROI really justifiable? And if not, will Big Tech even feel it, or will someone else be left to foot the bill?

In this episode of Magic Markets, The Finance Ghost and Mohammed Nalla explore the dangerous games that giants like Amazon, Alphabet and Microsoft are playing, exhausting their free cash flow on data centres and AI projects with a potential half-life of an overripe avocado.

Alphabet is borrowing money from a hundred years down the line. Is that the sign of the top? And if not, then what is?

Today’s Topics:

• A reminder of the US railroad bubble and how AI stacks up in comparison
• The market is punishing Microsoft and Amazon for deteriorating free cash flow margins
• The disruption to the valuation of the SaaS giants like Adobe and Salesforce 
• Free cash flow margins across various Big Tech names and how this has changed over time 
• Are the hyperscalers too big to fail, or could things go that badly?

Get in touch:

• The Magic Markets Website
• @MagicMarketsPod, @FinanceGhost, and @MohammedNalla (all on X)
• Pop us a note on LinkedIn

Disclaimer: This podcast is for informational purposes only and does not constitute financial or investment advice. Please speak to your personal financial advisor.

Chapters

• (00:00:00) - Introduction & A Technical Glitch
• (00:01:15) - Big Tech’s AI Capex Pig
• (00:02:45) - Is AI Eating the World?
• (00:04:15) - Why Meta is Spending 100% of its 2026 Cash Flow on Capex
• (00:05:41) - The Absurdity of Alphabet's 100-Year Bond
• (00:06:50) - Why Salesforce and Adobe are Under Fire
• (00:08:15) - The Cyclical Capex Pig: TSMC’s Struggle with the Foundry Model
• (00:10:30) - Microsoft: From Enterprise Software to Risky Infrastructure
• (00:12:15) - Amazon: Reinvesting Profits That Haven’t Happened Yet
• (00:13:50) - The Canary in the Coal Mine: Oracle’s Credit Stress and CDS Spikes
• (00:15:30) - Too Big to Fail? The Contagion Risk of a Tech Infrastructure Bubble
• (00:18:15) - ASML’s Dilemma: European Regulation and the Tax on Unrealised Gains
• (00:20:45) - How 2026 AI Spend Matches the 19th Century Railroad Bubble
• (00:23:00) - "Vibe Coding" and Disruption: Can AI Replace the SaaS Giants?
• (00:24:47) - Conclusion