Jefferies Greed & Fear AI and credit

AI and credit Verbier If the direction of the US Treasury ten-year yield is one key issue facing US-correlated world stock markets, another is the issue of the AI capex arms race and whether the recent sell-off in memory stocks is healthy rotation at the start of the quarter or something more fundamental as discussed here previously (see GREED & fear – AI fatigue and rotation, 9 July 2026), namely the market starting to sniff out that a deceleration in hyperscaler capex could be coming earlier than what investors have been assuming. The estimates for the four major hyperscalers’ capex this year and 2027 have been running at US$695bn and US$870bn respectively (see Exhibit 1). On this point, in its 2Q26 earnings release yesterday Alphabet increased its 2026 capex guidance by a further US$15bn to US$195-205bn.

Exhibit 1: Four major hyperscalers' capex

900 (US$bn) Meta Platforms 800 Alphabet (Google) 700 Amazon 600 500 Microsoft

E 2027E Note: Capex forecasts for 2026 are based on the midpoint of the latest company guidance for Amazon, Alphabet, Meta and Micros oft, excluding finance leases. 2027 capex based on consensus estimates. Source: Bloomberg, Companies, Jefferies

The capex guidance will be the key issue investors will remain focused on when the rest of the hyperscalers report their results next week in the cases of Microsoft, Amazon and Meta. At the start of the second quarter of this year, and in the presentation made at the Jefferies’ 7th Asia Forum in Hong Kong in March, GREED & fear had been of the opinion that there was significant risk that this year could mark the peak in AI capex because the view was that investors would start to ask hard questions about where the returns will come from, given that the AI capex arms race is now more than three years old and given that the nature of these former quintessentially asset light businesses has changed dramatically.

In the event, the hyperscalers raised their capex guidance in April to an astonishingly high 92% of their forecast operating cash flow this year and the market responded positively, with the initial exception of Meta because it was not then in the cloud business. This positive response was a surprise to GREED & fear. The optimism was driven in part by the remarkable surge in revenue growth at Anthropic (whose annualised run-rate soared from US$9bn in December to US$47bn in May (see Exhibit 2)), which was seen as confirming both the demand for agentic AI and providing proof of monetisation in the corporate market which Anthropic dominates.

Please see analyst certifications, important disclosure information, and information regarding the status of non-US analysts at the end of this report. 1 *Jefferies Hong Kong Limited

Exhibit 2: Anthropic annualised revenue run-rate

50 (US$bn) 47 45 Anthropic annualised revenue run-rate Jan-25 Mar-25 May-25 Jul-25 Aug-25 Oct-25 Dec-25 Feb-26 Mar-26 Apr-26 May-26 Source: Anthropic

This in turn triggered last quarter’s parabolic move in memory stocks, helped also by the arrival of single-stock leveraged ETFs in the Korean and Hong Kong markets, as also previously discussed here (see GREED & fear - The battle for capital and fast tracking, 4 June 2026). The Korean regulators announced last week a temporary suspension of new listings of single-stock leveraged ETFs to curb market volatility. The minimum deposit requirement, or minimum account balance in cash required to make a new investment in single-stock leveraged ETFs, will also be raised by threefold from W10m (US$6,787) to W30m (US$20,360). Meanwhile, President Lee Jae-myung’s approval rating seems to have declined of late with the stock market (see Exhibit 3).

Exhibit 3: Korean President Lee Jae-myung's approval rating 68 (%) President Lee's approval rating

26-Jun-25 10-Jul-25 24-Jul-25 7-Aug-25 4-Sep-25 16-Oct-25 30-Oct-25 13-Nov-25 27-Nov-25 11-Dec-25 25-Dec-25 8-Jan-26 22-Jan-26 5-Feb-26 19-Feb-26 19-Mar-26 16-Apr-26 30-Apr-26 14-May-26 28-May-26 11-Jun-26 25-Jun-26 9-Jul-26 21-Aug-25 18-Sep-25 5-Mar-26 2-Apr-26 2-Oct-25

Note: Data up to the week ended 16 July 2026. Source: Gallup Korea

If this is the backdrop it seems to GREED & fear that the questioning of the returns on AI…