Jefferies’ Chris Wood warns US AI boom could end in massive capital destruction

Jefferies strategist Chris Wood thinks America’s AI spending spree is heading somewhere uncomfortable. In the October 9, 2026 edition of his “GREED & fear” newsletter, he warned that the boom could end in massive capital destruction across the US AI sector. His culprit is not weak demand for artificial intelligence. It is competition from inexpensive Chinese open-source models, which he expects to keep winning market share while the price of AI output slumps. The spending that worries Jefferies Wood is Global Head of Equity Strategy at Jefferies, and his concern starts with scale. US hyperscalers have issued combined capital expenditure guidance of approximately $695 billion for 2026. That figure is projected to rise to $870 billion in 2027. Hyperscalers are the giant cloud operators that rent out computing power, and capex covers the data centers, chips and other hardware they buy to do it. Wood’s verdict on much of this outlay is blunt. He calls it “malinvestment,” an economist’s term for money sunk into projects unlikely to earn back what they cost. He also points to how the bills are being paid. In his analysis, the industry has shifted significantly toward debt financing r...