- The FOMC raised the federal funds rate by a quarter point to a range of 3.75% to 4%, its first hike since July 2023, in a unanimous 12-0 vote.
- New Fed Chairman Kevin Warsh framed the hike as overdue, saying inflation remains too high and the committee wants a faster path back to its 2% long-term goal.
- The AI infrastructure build-out is no longer cash-only: hyperscalers have flooded the bond market, so a higher policy rate changes the math on the next megawatt and GPU cluster.
- Nvidia generated about $74 billion of operating cash flow and nearly $70 billion of free cash flow in H1 of its current fiscal year against only $4.4 billion of capex, leaving its vulnerability on the demand side as hyperscaler customers face higher borrowing costs.
- Oracle's FY26 capex surged to about $55.7 billion, turning free cash flow to negative $24 billion, and management guided for another $40 billion of debt and equity in fiscal 2027 with credit rated BBB- by S&P Global.
- Amazon guided toward $220 billion of capex in 2026, up from a prior $200 billion estimate, with trailing-12-month free cash flow of negative $7.6 billion through June 30 after roughly $54 billion of bond issuance in March and a further $25 billion in the summer.
- Bank of America research cited in the article shows the big five hyperscalers issued $121 billion in debt during the period covered.
Quotes
“Inflation remains too high, and the committee wants a faster path back to its long-term goal of 2%.”
“A rate hike does not bankrupt big tech, but it does change the math on the next megawatt and the next graphics processing unit cluster.”
“Nvidia is in a position where cash shows up before the cement trucks do.”