alt Hacker NewsFive US tech giants' hidden debts soar to $1.65T on opaque AI funding
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Well technically they don’t own the debt, the SPVs that own the data centers do. The giants just have long term commitments, but if shit hits the fan, it’s not the tech giants but the banks that lent the money to the SPVs that are at risk. This usually means all of us are on the hook.
"hidden" debts and "opaque" funding I seem to read about every other day.
On the one hand, these debts may be off the balance sheet, but institutional investors certainly know about them and can reason about the company's valuation. Retail investors may be caught out slightly more.
But on the other hand, these companies are essentially paying for the service of taking the debt off books (by paying the leasing premium to the SPV partners). I guess I'm wondering what they really gain from doing so, if again sophisticated investors can see through the games?
To quote the Big short: "I have five houses and a condo."
The banks are not the ones on the hook here - they no longer lend in a meaningful way as first loss lender on many things. If they lend they do so as a senior financing provider to vehicles that provide the financing.
The actual lending is done by private credit institutions that have raised money, sometimes on the order of 10s of billions of $.
These debts mean nothing if the US government actually views AI technology as being on par with the Manhattan project. They'll just bail them out or nationalise them.
A bubble in progress waiting for right time (hello 2028) to burst.
It's hard not to be fatalistic about all of this now: In my mind, it's crystal clear that the investments will never be paid back. The revenue streams from all the companies involved don't add up. It must fail at this point.
That means losses. Big losses for some.
I assume that these off-the-books companies can quite literally be pinched off and the debt becomes the banks' problem, so the primary company, i.e. Meta, Oracle, can walk away but the banks will be left holding the bag.
We know what happened the last time the banks played their stupid games!
Pretty sure Tim Apple can flip open his wallet and pick up the tab for everyone, if he’s feeling generous.
Imagine shorting Alphabet stock now , just before the AI bubble bursts, what an opportunity of a lifetime.
That doesn't sound good, but out of curiosity: How do you exactly hide debt? Circular economy is easy to understand, but what else is cooking?