Anthropic’s (ANTH.PVT) leaked IPO prospectus once again reminded investors of the enormous cost of the AI build-out. The AI lab plans to spend $518 billion in the coming years on cloud, computing, and infrastructure costs, according to Reuters, after posting a net loss of $42 billion in 2025.
Successful IPOs for both Anthropic and OpenAI (OPAI.PVT) are contingent on optimism that revenue from their clients will eventually outpace that spending.
Two new analyses call that math into question.
One of the latest comes from Apollo chief economist Torsten Sløk. In the future, AI lab customers will have to make more money to pay the AI labs. But analysts aren’t predicting that kind of a boost. (Disclosure: Yahoo is a portfolio company of funds managed by affiliates of Apollo Global Management.)
“Wall Street equity analysts work in sector silos, and when you add up their forecasts, the numbers are internally inconsistent,” Sløk wrote in Tuesday’s Daily Spark.
“The analysts covering tech expect the sector’s operating cash flow to more than double to roughly $2.4 trillion by 2028, an increase of over $1.2 trillion. Meanwhile, the analysts covering the other sectors in the S&P 500, which are tech’s customers, expect those companies to add much less operating cash flow,” Sløk wrote.
Source: Apollo
Read more: Apollo’s Sløk: Is an ‘agentic bank run’ coming?
“In other words,” he continued, “the tech silo is betting on a future in which demand for AI and tech services explodes, while the silos covering the companies that would pay for those services see a much more modest outlook. Both cannot be right at the same time.”
“The bottom line is that either tech’s customers will generate a lot more cash than their analysts expect, or tech’s cash flow forecasts are too optimistic, which raises the question of who exactly will be writing all those checks to buy AI services.”
Similarly, a new report from Bain & Company predicted a large funding gap between the outlays required to fund the AI build-out and the revenue those firms will bring in.
“If we assume that capital expenditures amount to about 25% of industry revenue (an ambitious but reasonable percentage based on trends among cloud providers), sustaining this level of investment would require an AI market approaching $6 trillion annually,” the team led by Bain & Company Silicon Valley Partner David Crawford wrote.
The problem is that the consumer and enterprise AI market will likely total $1.2 trillion to $1.8 trillion, according to the Bain report, leaving a $4.2 trillion gap.