The Federal Reserve heads into its September policy meeting with inflation data about to test the case for higher interest rates, while an enormous AI infrastructure build out is creating another source of demand for increasingly expensive capital.
“Some of the companies that had been the most reliable generators of cash are now needing money,” Steve Sosnick, chief strategist at Interactive BrokersIBKR--, said on AInvest’s Capital & Power podcast. “So you’ve got governments competing with companies, in many cases very highly rated companies, to finance the AI build.”
That intersection of monetary policy and artificial intelligence spending could become one of the defining financial questions of the third quarter.
The Labor Department is scheduled to release the August Producer Price Index on Thursday and Consumer Price Index on Friday, just days before the Federal Open Market Committee meets Sept. 15-16. The Fed left its benchmark federal-funds target range unchanged at its July meeting, although Beth Hammack, Neel Kashkari and Lorie Logan dissented in favor of a quarter-percentage point increase, according to Federal Reserve minutes and the previous FOMC statement.
Sosnick said the new inflation reports will leave the Fed’s decision in play. His base case is that policymakers wait. “No hikes until December because I think they don’t want to draw the president’s ire,” Sosnick said. Whether the committee can defer a decision until December, he added, remains “a big open question.”
The bond market is already applying pressure of its own. The 10-year Treasury yield has been approaching 5%, increasing borrowing costs at the same time corporations are committing huge sums to AI infrastructure.
The scale of that capital demand is becoming increasingly visible. Reuters reported Wednesday that Amazon raised about $5.76 billion in its first sterling denominated bond sale. Hyperscalers have issued more than $200 billion of debt so far in 2026, more than twice their total for all of 2025, according to Reuters.
For Sosnick, that financing boom has implications beyond the bond market. Companies spending more on infrastructure have less cash available for other purposes, including share repurchases. “That’s not a plus necessarily for liquidity,” he said. “It’s also not a plus for stocks because they’re not buying back as much stock as they were. They just can’t.”
That makes cash flow an increasingly important Q3 metric.
“If you’re not sure about a company and how to value it, watch its cash flow,” Sosnick said, recalling one of the earliest lessons he learned in the investment business. “You can tweak revenue streams, you can certainly tweak earnings streams… You can’t really fake cash flow.”
The critical question is whether AI eventually generates enough return to justify today's spending. “For now, the consensus certainly is pretty much for all companies, no matter what you spend, it’s going to pay off in the proper manner,” Sosnick said. “I think history tells us it doesn’t work for everybody all the time, no matter how great the technological advances, no matter how life-changing the technology is.”
The concern isn’t theoretical. Political pushback against the AI buildout and delays involving access to electricity, water usage and supply chains are making lenders more cautious on some AI infrastructure projects. At the same time, the investment juggernaut continues. GoogleGOOGL-- said Wednesday it plans to invest roughly $15 billion in AI infrastructure in Finland over two years, while Amazon and Qualcomm recently struck a long term agreement under which Amazon could purchase as much as $60 billion of AI data center chips and related products.
Sosnick sees a historical warning in previous booms. During the internet era, enormous sums went into the fiber networks the economy ultimately needed, yet some of the companies that financed and built that infrastructure failed.
“I’m not saying this will be as apocalyptic as that. Let me be clear,” Sosnick said. But, he added, “there’s a lot of money, a lot of money that gets spent.”
For Q3, that leaves investors watching three things: inflation, interest rates and cash flow. If CPI and PPI keep pressure on the Fed while AI investment keeps pushing companies into capital markets, the technology boom that has powered corporate spending could increasingly have to prove that its promised returns can justify its financing costs.
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