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| By Nilus Mattive |
I have a lot of concerns about artificial intelligence and its potential impact on many aspects of humanity.
But for today, let’s focus on the biggest, most direct, most immediate one — the AI buildout’s potential to cause a financial crisis even bigger than the subprime loan implosion 20 years ago.
Martin and I are actually so concerned about this that we just created this new video alert to explain all the details and warn as many Americans as possible.
However, most other people, including the Wall Street establishment, continue telling us everything is fine.
This is exactly what happened last time even though the signs of recklessness and accounting trickery are all around us.
For example, Broadcom (AVGO) just announced a new agreement to loan Anthropic $42 billion to lease its chips. And it is reportedly trying to raise an additional $60 billion for the same purpose.
That’s as much as $102 billion in loans and leases from a company that is only expected to generate about the same amount of money in sales this year!
Yet the deal comes hot on the heels of similar arrangements that Anthropic already has with Amazon (AMZN) and Microsoft (MSFT).
Indeed, the so-called “Magnificent 7” companies are spending money hand over fist in a race with each other to get as much computing power as possible.
Alphabet (GOOGL) now expects 2026 capital expenditures of between $195 billion and $205 billion.
Meta (META) projects $130 billion to $145 billion, including a $27 billion deal it recently inked with Blue Owl (OWL).
Amazon recently lifted its capital-spending plan to roughly $220 billion.
AndMicrosoftspent $41 billion on capital expenditures in its latest quarter alone, with roughly two-thirds directed toward CPUs and GPUs.
Meanwhile, the chipmakers receiving a lot of this spending are also plowing it back into AI infrastructure through various loans, investments and acquisitions of their own.
I mentioned Broadcom already.
Well, earlier this year, the company raised $35 billion through lenders like Blackstone (BX) and Apollo (APO)to help build out new computing capacity — i.e., data centers using its chips.
The companies have since been working on raising ANOTHER $75 billion (or more!) in additional capital for the same purpose.
Note that these loans are not sitting on Broadcom’s books.
They are structured as “special purpose vehicles” (SPVs), separate legal businesses that raise the money, buy the chips, then lease those chips to the end customers.
Market darling Nvidia (NVDA) — yet another Mag 7 name — is currently the king of this type of circular financing.
The company recently partnered with six big financial firms to plow another $500 billion into AI infrastructure.
Who were those firms?
Apollo, BlackRock (BLK),Blackstone, Brookfield Asset Management (BAM), Goldman Sachs (GS) and KKR (KKR).
As you can see, the more you dig into the topic, the more you keep coming up with the same old companies.
Again, it’s crucial that you understand what we’re talking about here.
More than a trillion dollars just this year alone for the AI buildout, much of it through shady circular financing deals and secured by the very equipment it’s paying for.
That equipment, by the way, is not exactly high-quality collateral.
Billionaire bond investor Jeff Gundlach has likened this situation to warehouses of “newly engineered bananas of unknown life” that “will likely not age well.”
Bottom line …
Subprime mortgages were bundles of loans made on overinflated houses to borrowers with uncertain futures.
These new private credit AI loans are made on rapidly depreciating data centers to borrowers who may not make enough money quickly enough to justify the loans in the first place.
So if the AI buildout fails to produce massive amounts of cash flows and profits … or if investors simply start to question whether it will … this whole thing could blow up quickly.
Still, maybe you think the worst that can happen will be problems for a few private credit companies and some of the tech firms involved in all this circular financing.
Well, think again …
The AI buildout has basically been our country’s only economic engine over the last few years … these loans have worked their way into all types of places … and the companies most exposed to them are now underpinning the entire U.S. stock market.
So it isn’t just about the opaque loans being made directly to, or between, technology companies.
If the AI buildout merely sputters, so does the American economy.
If some of the loans start going bad, they could ripple through the banking system and into the annuities being issued by many big insurance companies.
And if the AI and Mag 7 companies don’t deliver mind-blowing profits, the U.S. stock market is almost certainly going to crash.
It’s an all-too-familiar script, one that Martin and I saw play out in real estate almost two decades ago … and in tech stocks a decade before that.
We warned repeatedly then, and I will continue to do the same this time around.
Best wishes,
Nilus Mattive
P.S. In that new video warning I mentioned earlier, we don’t just provide far more evidence than what I covered here today.
We also give you several concrete steps to take now, while there is still time to protect your portfolio.
So I recommend taking a little time to watch the whole thing right now.
