David Leon joined ausbiz to discuss why the biggest question facing markets isn’t AI demand, but AI infrastructure financing. David noted a growing disconnect between investor sentiment and economic fundamentals, with the U.S. economy growing strongly and consumer spending holding up well. With earnings up around 25% against market gains of around 10%, markets could be considered cheaper than 12 months ago, and earnings growth is broadening beyond the Magnificent Seven.
David also discussed Anthropic’s IPO prospectus, which highlights both the extraordinary growth and cost of AI. Despite strong revenue growth and a first profitable operating quarter, the key question is whether revenue can keep pace with its enormous computing commitments. Demand for computing power, data centres and electricity remains strong, but infrastructure is struggling to keep up. David highlighted that the winners won’t necessarily be the biggest spenders, but those with the strongest cash flows and the ability to support their debt.
Turning to Australia, David pointed to the failed Firmus float and NEXTDC’s share price fall as signs of a broader structural problem. Despite Australia’s natural advantages in energy, critical minerals and capital markets, he noted the right policy settings could see Australia outpace U.S. growth.
