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The AI Revenue Showed Up. The Spending Grew Faster.
For two years the complaint about artificial intelligence was that the spending was real and the revenue was a promise. SpaceX’s report Tuesday answered half of that. Its AI unit, which absorbed Elon Musk’s xAI, brought in $7.6 billion in the quarter, up from $2.56 billion in the quarter before, and the unit earned about $5 billion before depreciation, on the company’s adjusted measure.
The other half is the bill. SpaceX spent $19.6 billion on equipment and construction last quarter, more than its entire $14.6 billion of revenue. Management guided this quarter’s spending to $35 billion to $40 billion. Musk said he expects 2.5 to 3 gigawatts of computing power online by year-end and about 10 more gigawatts added in 2027. One gigawatt is roughly what a large nuclear reactor produces.
Spending that size needs a lender. On October 7 this letter covered SpaceX’s search for $40 billion of chip financing, most of it as investment-grade corporate bonds. Before Tuesday’s report, Morgan Stanley analyst Adam Jonas wrote that the “need for additional financing remains a key overhang.” A quarter that nearly doubles the spending guide leaves that overhang in place.
The same pattern showed up in a second filing Tuesday. The Wall Street Journal reviewed a draft IPO prospectus from the AI developer Anthropic showing first-half revenue of $16.3 billion, up from $1.1 billion a year earlier. Its $80.7 billion net loss was mostly an accounting charge, about $72 billion of non-cash adjustments on convertible financing, loans that can later turn into shares. The cash line is more useful: nearly $9 billion spent on computing in six months, against $7.3 billion in all of 2025.
Behind the private borrowing sits the public kind: the federal deficits that set the rate every one of these loans is priced against. Some investors would rather own something outside that system altogether, and one gold firm argues decades of overspending could be reset with a single executive action.
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My steadier read. I weigh any “one signature fixes it” promise against how slowly real budgets move, and France is a live example.
A correction. Tuesday morning’s letter said France’s National Assembly would vote that day on the revenue half of its 2027 budget. The vote was pushed back because a large number of amendments were still being debated, according to Reuters. The debt and interest figures in that letter stand, and Moody’s still reviews France’s Aa3 rating this Friday.
Outside the build-out, companies are trimming. Netflix is cutting about 1,000 jobs, roughly 6% of its staff and its largest reduction since 2022, and lowered its ad-revenue goal for the year. General Motors fell 6.84% Tuesday after warning about commodity costs, despite beating estimates and approving a $20 billion buyback.
The tape showed the same split. The Dow and small caps rose more than 1% while the Nasdaq finished flat, and health care closed at a record.
Tonight’s buyer. On Monday this letter flagged this week’s earnings as the first hard look at whether AI spending is still accelerating. Meta reports after the close. In July it guided 2026 capital spending to $130 billion to $145 billion, and it spent $31.1 billion in the second quarter alone. Analysts expect third-quarter revenue of $63.34 billion, up 23.6%, according to MarketPulse.
The revenue number matters less than the spending outlook for 2027. Meta’s stock fell for a fifth straight session Tuesday, and options traders are pricing a move of about 7% either way. Tesla, IBM and Texas Instruments also report tonight.
A stock priced to swing 7% in either direction is a trader’s setup, and some traders build whole strategies around moves like that. One firm applies the idea to the most volatile asset many readers own, bitcoin, which traded near $81,500 on Tuesday.
My steadier read on that. A trade that “pays either way” still carries costs and can lose money, so I’d treat it as something to learn about before putting money behind it.
What it means for your money. I don’t read Tuesday as a bubble signal. In 2000 many internet companies had no revenue at all, and SpaceX just showed billions. The risk sits in the timing. Revenue is growing by billions a quarter while spending grows by tens of billions, and the gap is being filled with borrowed money.
As this letter noted on October 6, the ten largest companies make up about 39% of the S&P 500, and most of them are on one side of this trade or the other. Add a technology fund and a bond fund that holds investment-grade corporate debt, and many portfolios carry the AI build-out three times. A six-month Treasury bill pays 4.36%, per the Treasury Department. That is the bar any new money into this trade has to clear.
What to watch. Tonight, Meta’s first word on 2027 spending. A higher number with strong ad revenue says the buyers can still pay. A higher number with soft revenue would push the financing question from SpaceX to the largest names in your index fund. Then Friday, Moody’s on France, and next Tuesday and Wednesday, the Fed.
AI revenue now shows up in the filings. The next round of spending will be paid for with borrowed money, and your index fund and bond fund are among the lenders.
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