AI Infrastructure Supercycle Etienne's Exclusive Econ Note · 2025

The Tectonic Shift in Compute

Industrialised AI means trillions in CapEx. This deck maps the capital flows, circular financing loops, and valuation divergence between the hegemon (NVIDIA) and the Neoclouds (CoreWeave, Nebius) as power and debt become the binding constraints.

Mag 4 CapEx 2025
~$290B
Forced over-investment floor
NVDA Margins
73-75%
Software-like economics
Nebius Cash
$2.26B
Net cash + $17.4B MSFT deal

Thesis Logic

The Bull Case
Prisoner's Dilemma forces CapEx
↓
Supply-constrained environment
↓
Structural Demand through 2026
The Bear Risk
Asset Financing (5-7yr Debt)
≠
Asset Economic Life (2-3yr Chips)
↓
Melting Collateral Scenario
Signal

Follow power PPAs and credit spreads, not press releases. Silicon without electrons or cheap debt is stranded inventory.

Section I

The Macroeconomic Backdrop

The Prisoner's Dilemma & The Physics of Compute

2025 CapEx Estimates

Alphabet
$93B
Amazon
$73B
Microsoft
$65B
Meta
$65B

The Prisoner's Dilemma

Under-invest in AI Infra
→
Lose Franchise / Obsolescence
→
Rational Choice: Over-invest ($290B)
→
Nvidia Revenue Pipeline Locked
Section II

The Hegemon: NVIDIA

Software margins on hardware sales. A fortress balance sheet.

F3Q26 Revenue
$57.0B
+62.5% YoY
Gross Margin
73-75%
Stable
Backlog
>$500B
Blackwell + Rubin
Section III

The Financial Web: OpenAI

The Gravity Well of the Industry

The Valuation Paradox

Valuation ~$500B
→
2025 Rev ~$13B
→
2025 Net Loss ~$9B
→
Requires Strategic Backstop (MSFT/Oracle)
Section IV

Battle of the Neoclouds

CoreWeave vs. Nebius: Divergent Capital Structures

CoreWeave

The Levered Beta

Aggressive, high-beta play. Effectively a leveraged project finance vehicle.

Debt Load $1.5B → ~$14.0B
Cost of Capital ~14% (Junk Bond Rates)

Nebius Group

Net Cash Phoenix

Restructuring story with fortress balance sheet and hyperscaler validation.

Liquidity $2.26B Net Cash
Validation $17.4B Microsoft Deal
Section V

Structural Risks

The Melting Ice Cube & Duration Mismatch

The Duration Mismatch

Debt Maturity: 5-7 Years
→
Asset Economic Life: 2-3 Years
→
Under-water Assets
→
Risk similar to 2008 Subprime
Section VI

Valuation & Scenarios

Modeling the Supercycle Outcomes

Upside anchored by backlog and power scarcity through 2027

NVDA

Backlog-led upside: $250-$275 price objective

NEBIUS

Multi-bagger setup: $17.4B Microsoft contract de-risks scaling

CapEx pause while hyperscalers optimise utilisation

NVDA

Growth slows to 20-30%; forward PE drifts toward ~25x

COREWEAVE

Needs pricing power to cover 14% paper

Application-layer ROI disappoints; demand air pocket

NVDA

Cisco moment risk: A 50% drawdown if GPU demand resets

COREWEAVE

Melting collateral meets fixed 5-7yr debt

Investment Framework

A Nuanced, Barbell Approach

NVIDIA (Core Holding)

Buy - Core

FCF generation of $22B/qtr and PEG ~0.6x. Risk of cyclicality is outweighed by backlog scale.

Nebius (Aggressive Alpha)

Buy - Speculative

Asymmetric risk-reward. Market discounts the $17.4B MSFT validation and Net Cash.

"Revenue growth is vanity; Free Cash Flow is sanity."

In 2026, the market shifts focus to who can pay for their growth.

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