AI Capital Expenditure Increases Financing Pressure, Global Assets Reassess Interest Rates and Safe-Haven Demand

On October 22, global markets are repricing AI financing, interest rates, and geopolitical risks. Former New York Federal Reserve Bank President Dudley warned that AI investment could lead to interest rates rising before falling: demand for data centers, chips, and power construction will temporarily boost demand and compete for savings, raising financing costs; however, if capital expenditures peak or high-leverage corporate financing weakens, investment and wealth effects may contract in reverse, forcing the Federal Reserve to cut interest rates faster, thus potentially distorting the stable interest rate path reflected in market pricing.

Third-quarter revenue grew 26% year-on-year to $64.6 billion, indicating that AI recommendation systems have improved advertising efficiency; however, the company raised its 2026 capital expenditure forecast to between $135 billion and $145 billion, with free cash flow turning negative for the first time since 2012. U.S. Treasury Secretary Yellen downplayed the systemic risks of AI, but investors still need to assess whether the massive investments can translate into sustained cash flow; a positive short-term stock performance does not mean the risk of capital recovery has disappeared.

Funding pressure is also reflected in other markets. Japan's inflation has reduced the real burden of existing nominal debt, with former central bank officials estimating that this has created about 195 trillion yen in "debtor income," but the Bank of Japan's interest rate hikes will gradually increase the refinancing costs of new debt. The U.S. plans to lend up to 315,000 barrels of heating oil reserves to alleviate winter supply pressures in the Northeast, but the limited release may not be sufficient to significantly lower retail prices. Meanwhile, privately held gold in Singapore has increased to about 800 tons over the past decade, approximately 16 times that of 2014, indicating that high-net-worth funds are increasingly valuing asset custody locations and legal risks.

Attacks on merchant ships in the Black Sea and casualties among crew members have pushed geopolitical risks towards NATO's eastern flank, with shipping insurance, energy supply, and defense spending potentially facing greater pressure. What the market needs to observe next is not just the direction of interest rates or oil prices, but whether AI investments can generate sufficient returns, how financing costs are transmitted, and whether security risks continue to drive up supply chain costs.

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