Who would you give your money to, hyperscalers or the U.S. government?

More AI trillions
You know things have reached a point when more than $2 trillion in investing can be announced in one week and nobody's even really talking about it. 

This week, three major banks announced three major investment consortiums, all to fund the AI infrastructure buildout. Bank of America announced a $250 billion effort, which our Penny Crosman reported, and that's the smallest of the three. Goldman Sachs is part of a group looking to raise $500 billion. Meanwhile, Morgan Stanley announced an initiative that is more than twice the size of those two combined, $1.5 trillion. That's more than $2 trillion of spending announced in a single week.

One reason it's not garnering more attention is because it's largely been expected. I spoke to John Lovelock, the chief forecaster at Gartner, who said the spending is part of what his firm has been predicting. While the firm didn't know exactly where the money was coming from, this new bout of capital raising still fits within the firm's expectations that the industry will spend about $6 trillion between this year and next to build out the AI infrastructure. Still, Lovelock acknowledged that is an astounding amount of money. "That's more than the buildout of railroads in the U.S. and Europe, and the International Space Station, combined," he said. 

What's troubling about that comparison is that two of those three things resulted in historic bubbles and credit meltdowns. We know that the banking industry has been largely shielded from taking on the kinds of risks that led to the Crash of 2008 by the laws that were passed in response to that catastrophe, but that doesn't mean those risks aren't present. And the growing connections between traditional banks and private credit is opaque, so we don't really know just how exposed banks actually are.

Another wrinkle is that you now have a massive, massive need for credit from two possibly competing corners: AI and the U.S. federal government. The U.S. national debt is about to cross the $40 trillion mark (it probably has already but the Treasury Department's Debt to the Penny site doesn't seem to be updating). The federal government is $1.8 trillion in the hole so far in fiscal 2026, so it needs to find capital. Bloomberg on Monday reported that the competition for debt buyers is pushing up yields on government securities; the latest evidence being the results of last week's 30-year bond sale, where yields hit a 25-year high.

 "Hyperscalers now compete with Treasury for the same capital," wrote Jack Bowman, an analyst on Seeking Alpha. I'm not sure that's exactly true — I'd imagine the market for ultra-safe government debt is somewhat different from the market for higher yielding, higher risk tech debt — but when both are seeking trillions from creditors, every year, there is surely some overlap there.

It does raise the question of just how much absolute demand there is for debt globally, something we don't usually have to even think about. 

JPMorgan is not gambling around
On Friday, the Financial Times reported that last year JPMorganChase terminated its banking relationship with Polymarket. The given reason, according to the FT, was regulatory concerns. While JPMorgan dumped Polymarket for banking, it apparently still has some kind of relationship. Polymarket told the FT that it still uses JPMorgan across "multiple entities;" the bank apparently is keeping some connection on the expectations that Polymarket will go public at some point. 

I wrote about Polymarket and Kalshi last week, pointing out that they exist in a regulatory grey zone right now, and that isn't going to change. Or, rather, it will of course change at some point, but that point isn't coming soon.

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There is a judicial path and a legislative path, and both seem pretty long. On the judicial front, there will be a series of court cases, such as the one the New York Attorney General filed against Kalshi, that wind through the courts, possibly ending up at the Supreme Court. On the legislative path, if Democrats were to somehow take both chambers of Congress, they could pass some of the bills to regulate these companies that have been introduced. But, those would likely be vetoed by this president.

It wouldn't be such a big deal if these outfits didn't try to sell themselves as derivatives platforms. If they just copped to be gambling sites — they do, after all, garner the vast majority of their revenue from betting on sports — there'd be no problem for banks. It's the legal question that makes doing business with them risky. Apparently JPMorgan came to that conclusion on its own already.