Chris Wood, the Jefferies strategist behind the *Greed and fear* note, has thrown cold water on the consensus that Meta, Alphabet, Amazon and Microsoft will deploy $990 billion of capital expenditure in 2027. The figure represents a step-up from the $165 billion the four spent in the second quarter alone, a period in which they generated just $7 billion of free cash flow. Consensus now sees aggregate free cash flow swinging to a negative $12 billion in the third quarter, a dramatic reversal from the $60 billion produced in the final three months of 2025.
The Indian IT buffer
Wood argues that the feared AI disruption to India’s services sector has yet to appear in employment data. The ten largest Indian IT firms added 6,200 staff during the June quarter earnings season, a modest increase, but an increase nonetheless. At the same time, hiring at multinational global capability centres continues to expand, evidenced by sustained demand for office space. Indian fund managers, he observes, are pricing the sector as a “reverse AI trade,” mirroring the way overseas investors have treated the broader Indian market. Infosys now trades at 13 times one-year forward earnings with a 5 per cent dividend yield.
The slowdown chorus
The capex skepticism gained company this month when Anthropic chief executive Dario Amodei posted on X that AI agents could be capable of seizing control of the entire internet within roughly a year, risking losses measured in the hundreds of billions. Amodei called for a deliberate deceleration in model capability advances. OpenAI’s Sam Altman and xAI’s Elon Musk publicly endorsed the appeal. The intervention briefly lifted sentiment for technology shares on Dalal Street, though Wood’s note suggests the market may be underpricing the cash-flow consequences of the current spending trajectory.
What to watch
The next test arrives with third-quarter hyperscaler results, where the consensus free-cash-flow deficit will either materialise or prove overly pessimistic. A second signal will come from Indian IT hiring trends: if the 6,200 net additions mark a peak rather than a floor, the reverse-AI trade could unwind as quickly as it formed. For now, the numbers show a widening gap between capex ambition and cash generation, and a labour market that has not yet received the memo.