Bloomberg Surveillance · Tuesday, September 8, 2026
Stuart Kaiser of Citigroup highlighted a significant year for earnings revisions, with forward S&P earnings projected to rise substantially due to AI CapEx from hyperscalers. He explained that these companies are borrowing at around 6% to invest at an estimated 30% return, a math that drives continued spending despite potential free cash flow strains.
“If you look at forward 12-month S & P earnings, they were 311 at the starting of the year. They're 397 now, which is a stunningly large number. We've sort of termed it trickle-down EPS. You have these hyperscalers that are spending massive amounts of money on the AI CapEx build-out, and that money is just trickling down to the rest of the market. and you're just seeing very broad-based earnings revisions.”
“If you look at the average credit spread of those hyperscalers, it's basically tripled over the last 12 months, but it's only 66 basis points. So to your point, you had very strong free cash flow for these companies. They have issued debt. They are spending that free cash. But the bottom line is they're borrowing, you call it 6%, and they're earning, in our estimate, almost 30% on that investment.”
“AI CapEx will continue as borrowing at 6% to earn 30% is hard to resist.”