Don’t Drink The Kool Aid

Avatar photo Doug Kass on July 14, 2026

From Julien at Macrostrategy:

I have calculated depreciation schedules for the Hyperscalers, based on current data plus Bloomberg capex forecasts to 2032. Under the most generous assumptions on chip depreciation (six years), and assuming 12% annual growth in underlying net income for the hyperscalers (not assuming any fresh AI income), depreciation reaches 98% of underlying net income by 2033. This means that the most successful businesses in the history of capitalism, have to build something that repeats all their past successes, and their extraordinary current market dominance, just to break even on the trade. They need to do much more than that to come out ahead.

Just to be clear, they are going to have to build the commercial equivalent of another Amazon digital marketplace, Amazon Web Services, Facebook, Instagram, WhatsApp, Google/Amazon/Microsoft Cloud, Google Search, YouTube, Google Play Appstore & Android OIS, Microsoft Office suite, SpaceX, Twitter and Oracle database solutions, from scratch, in seven years. And that’s just to break even on the LLM AI bet.

This note explains why they will never achieve that, or anything close. For the sake of your portfolios, ‘don’t drink the Kool Aid’.

Positions: Long AMZN VS GOOGL VS MSFT VS

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Posted by Doug Kass

Doug Kass is a world-renowned hedge fund manager with decades of experience and success navigating through some of the most turbulent periods in market history. He is known for his time-tested analytical skills and ability to look past the current noise and herd mentality. On TheStreet Pro, Kass provides frequent market commentary and investing ideas for active investors throughout each trading day in Doug’s Daily Diary. He also serves as president of Seabreeze Partners Management Inc. Previously, he served as a senior manager at Omega Advisors, a $6 billion investment partnership. He co-authored a book with Ralph Nader and the Center for the Study of Responsive Law called “Citibank: The Ralph Nader Report” and can be found as a guest host on CNBC's "Squawk Box." A Note from Doug: Current strategies and actionable trade ideas -- all on one dynamic platform built exclusively for active trades. From sudden sell-offs to sudden spikes, TheStreet Pro arms you with crucial analysis -- at a rapid fire, professional pace -- to help you make sound trading decisions -- every day, every hour, and every minute. Join me and my team of professional traders for unique perspectives and breakthrough investment opportunities.

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