Senator Everett Dirksen's famous quip about federal spending, "a billion here and a billion there and pretty soon we're talking about real money," now reads as almost quaint. The numbers confronting capital markets today operate on an entirely different scale, and Louis-Vincent Gave argues that the collision between an exploding demand for capital and an increasingly constrained supply is the defining macro force of this investment cycle.
The Demand Side: Five Concurrent Capital Drains
Gave identifies five simultaneous and largely unprecedented draws on global liquidity, each individually significant, collectively staggering.
The first and largest is AI infrastructure. McKinsey estimates global data center buildout through 2030 at US$6.7 trillion, or roughly US$2 trillion annually. With hyperscalers generating only US$500 billion in annual cash flow, approximately US$1.5 trillion per year must come from new debt and equity issuance. Gave contextualizes the scale: "Over the past 15 years, China is estimated to have spent US$350-500bn building almost 40,000 km of high-speed railways." The AI data center boom is roughly half the size of China's entire construction boom from 2014 to 2018, a period that rehoused 800 million people, but with a far faster depreciation cycle and higher obsolescence risk. Against the dot-com buildout, today's AI capex is approximately seven times larger.
The second drain is equity issuance. The record year for global IPOs was 2021, when US$300 billion was raised into a world of negative-yielding debt and central bank balance sheet expansion. "Today, against a very different backdrop, five companies, Alphabet, Meta, SpaceX, Anthropic and OpenAI, are proposing to raise essentially as much, in the space of a few weeks, on the US equity market alone." The shift from buyback-driven capital return to equity issuance at historic scale marks a structural reversal in the flow of liquidity back to shareholders.
Third, defense spending is accelerating globally, from the US adding US$500 billion annually to Europe nearly doubling its military budget, Japan, South Korea, Taiwan, China, and Gulf states all increasing outlays simultaneously.
Fourth, Middle Eastern sovereign wealth is being redirected inward. The Iran-Strait of Hormuz crisis has accelerated domestic infrastructure spending across the UAE, Saudi Arabia, and Qatar, capital that previously recycled into global markets.
Fifth, commodity stockpiling. Post-Hormuz, companies and nations will rebuild oil, fertilizer, and grain inventories. "The stockpiling of commodities by companies and countries will be a liquidity drain nonetheless."
The Supply Side: The Conditions of 2021 Are Gone
Gave draws a sharp contrast to the last record liquidity cycle. In 2021, US$10 trillion in OECD debt traded at negative yields, central banks were monetizing fiscal deficits, and governments were literally mailing checks to citizens. None of those conditions exist today. The ECB has just raised rates. The Bank of Japan raised rates this week. The new Federal Reserve chair is signaling balance sheet reduction. China is actively restricting capital outflows and the renminbi is rising. Energy prices are up, acting as a liquidity drain in their own right. "In short, the demand for capital is going through the roof, while its supply seems ever more constrained."
The Valuation Problem: More Fools Than Money
Gave invokes an aphorism from Beat Notz of Notz Stucki, one of his earliest clients: "It's an easy business. You just need to figure out if there is more money than fools, in which case you buy stocks, or more fools than money, in which case you don't."
By the measure Gave cites, a modified Buffett Indicator comparing market capitalization to broad money supply (M2) rather than GDP, US equity valuations have eclipsed even the 1999 to 2000 peak. This extreme reading was earned legitimately. The capital-light business models of the past 25 years, characterized by the "we think, they sweat" outsourcing model, generated enormous free cash flow that recycled back through buybacks, compressing the money-to-fools ratio upward. Now, that model is inverting. "Instead of injecting liquidity back into the market through buybacks, the likes of Alphabet, Meta and others will now be draining the market with share issuances of unprecedented size."
The Beneficiary: Banks With Deep Deposit Bases
In a rising cost of capital environment, Gave identifies global banks as the structural beneficiary, particularly those with large depositor bases rather than wholesale funding dependency. Japanese banks have led this trade in 2026, a direct expression of the steepening Japanese yield curve. Canadian banks have massively outperformed, a re-rating Gave characterizes as "a market massively rerating as policymakers go from being abjectly bad to merely mediocre." European, Chinese, and UK banks have tracked the global bank index. US, Latin American, and Australian banks have lagged, which Gave suggests may represent the opportunity set if the cost of capital continues to rise. "The global liquidity environment is undeniably changing rapidly before our eyes. This should benefit the banks in Japan, the eurozone and China that have built large depositor bases."
5 Key Takeaways for Advisors and Investors
- The capital cycle has structurally reversed. The era of buyback-fueled liquidity injection from mega-cap tech is over. Equity issuance at unprecedented scale, driven by AI capex requirements, will drain market liquidity for years. Position accordingly.
- The 2021 comparison does not hold. Anyone extrapolating the 2021 IPO boom as a precedent for today is misreading the monetary environment entirely. Rates, central bank posture, energy prices, and negative-yield debt are all pointing in the opposite direction.
- US equity valuations carry unusual risk in this context. With the money-to-market-cap ratio at historic extremes and liquidity supply contracting, the margin of safety in US large-cap growth is structurally thin.
- Global banks with deposit-funded balance sheets are the clearest structural winner. Japanese and Canadian banks have already moved. European and Chinese banks remain in play. US banks reliant on wholesale funding face meaningful headwinds.
- Commodity stockpiling is a stealth macro theme. Post-Hormuz rebuilding of strategic reserves across energy, food, and materials represents a persistent, underappreciated liquidity drain that will keep commodity-linked assets supported.
Footnote:
1 Gave, Louis-Vinccent. "Demand And Supply Of Money | Evergreen Gavekal." Evergreen Gavekal, 24 June 2026,
