Every quarter, big tech companies release their huge expenses related to artificial intelligenceFrom data centers to chips. These are enormous sums that frighten markets and investors and represent a gamble on the future. They are based on the hope of meeting today's obligations thanks to revenues arriving tomorrow, when consumers and businesses have adopted AI in every aspect of American life. However, if these assumptions about technology and demand prove incorrect, the agreements made to secure future capacity in advance could become a huge burden for technology companies and their investors. And, as the ECB reported yesterday, also for European households, exposed to $440 billion in U.S. big tech.
For Big Tech: 3.000 billion in off-balance-sheet commitments
The official numbers released by various companies, however, may be just the tip of the iceberg. Analyzing the footnotes contained in the most recent financial documents, the Wall Street Journal found that nine major tech companies have approximately $3.000 trillion in off-budget commitments, mostly AI-related, obligations that are growing faster than traditional “capital expenditures” (Capex), which in the last year amounted to a total of approximately 600 billion dollars.
Big Tech: $1.200 trillion for leasing and $1.900 trillion for hardware and chips
The US business newspaper also provides concrete examples: Meta has kept the $12,3 billion it will have to pay to lease the giant Hyperion data center to be built in Louisiana off its balance sheet. The expense will only be accounted for when Mark Zuckerberg's company begins paying rent.
Overall, in the companies analyzed by Journal – in addition to Meta also Alphabet, Amazon, Microsoft, Oracle, Nvidia, Broadcom, SpaceX and Advanced Micro Devices – the payment promises relating to these leasing contracts not yet started amount to $1.200 trillion in off-balance sheet obligations, about four times as much as declared a year earlier.
Added to these commitments are those related to hardware and memory chips, for which companies sign long-term contracts well in advance. Here too, in fact, according to accounting principles, purchasing commitments generally remain off-balance sheet until the product is delivered or the service is provided. How much are we talking about? 1.900 billion dollars, according to Wall Street JournalAs of June 30, only Alphabet, Google's parent company, has purchase commitments and contractual obligations for 811 billion dollars.
AI between optimism and pessimism
How will the US big tech companies be able to meet all their commitments? the optimists, The surge in demand for AI tools—which has boosted the stock market and caused shortages of essential hardware—is evidence that demand will remain strong in the years to come and that the revenues that arrive will be sufficient to pay the bills. Those most concerned, however, speak of “disturbing signal”If things were to go badly, in fact, these giants would find themselves paying a very high price for infrastructure they cannot operate profitably, finding themselves forced to resort to new loans.
“As these off-balance sheet commitments become more frequent, larger, and more complex, it becomes increasingly difficult for investors to assess the overall level of potential debt of companies,” accounting analysts at Morgan Stanley wrote in April.
