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Leveraged Buildout
Last weekend, I noted that it's not realistic to expect America's largest hyper-scalers to fund the
long tlt?
“Not only is that latter proposition unrealistic, I’d argue it’s inadvisable and certainly undesirable for those of us who depend on buybacks to artificially inflate stock prices. . . .”
That’s the real problem right there! That’s why the idea of the government “backstopping” AI’s buildout is so absurd. They have the money! They are called risk assets for a reason, no? They can also issue issue bonds, (more) stock, or just slow down a bit (as absurd as that sounds). Yes, there will be winners and losers.
H-Man, it would seem that bubbles and leverage go hand in hand. If the hyper-scalers are just starting to fund AI capex with debt, this could go on for awhile with a really big bang at the end. For the time being, AI has found the air needed for the bubble to keep inflating.
The more disturbing part of that New Yorker article has to do with the implications for energy infrastructure. I wonder what the new debt load would be if that debt were combined with the AI borrowers. A “crowding out effect”? Aside from the financial implications, the transition from carbon to renewable energy sources gets put on permanent hold or “overshoot”.