alt Hacker NewsBanks are now trying to offload the AI data center debt they just underwrote
Comments
Isn’t this a perfectly normal thing banks do with all large debt? Any bank underwriting any $40b loan was always going to syndicate it.
Not to do so would be reckless.
What is unusual about this is that syndications usually clear in a few weeks but this has been stuck in distribution for six months and still not closed.
I saw an article a couple of days ago on one of the popular sites (ft or Bloomberg or something), about how now is a great opportunity to purchase private company credit. Guess this is the submarine https://paulgraham.com/submarine.html
This is just what banks do O_o underwrite loans, then collateralize (i.e. bundle) to people who want the risk.
With bad dentists (1) and bad debt underwriters on the HN front page, I love that subjective diagnosis remains challenging and topical.
So, is this the type of signs we should be on the lookout anticipating an impending implosion?
When are we getting CDOs with Nvidia GPUs as collateral as Nvidia envisions?
Major base rate fallacy.
This is common. Selling debt is normal. If there is money to be made by selling the debt and going back to issuing more loans, they’ll try to find a buyer.
Everyone is so primed to believe that all things related to data centers are bad that they’ll assume this is a special event. The person writing the headline knows that.
Who is building the infrastructure to resell the gpus from failed data centers if / when this collapses. It would be a waste for everything to get wasted
Yeah that's sort of how banks work.
The media will do anything to capitalize on public fear, seriously...
Same thing they did with bad mortgages just before the 2008 crash.
"bank does what banks normally do" is not news
This sounds like fearmongering. Banks aren't in the business of collecting on debt. They are in the business of writing loans they can sell to people who collect the debt. This is pretty standard business in the 2020s. Not defending data centers or AI or whatever, not denying that there is an AI bubble. Just saying that this is how business is done now.
JOHN TULD: And Mr. Sullivan that challenge is?
PETER SULLIVAN: We have to hold these assets on our books longer than we might ideally like to.
JOHN TULD: Yes.
I'll be damned if I don't get to throw people off roofs this time.
There's also a non-zero chance gubernatorial elections are won on the basis of pardoning such transgressions in the future.
Y/N
Is this our chance to 'get rich' by buying a negative valued asset? Like that time barrels were trading at 0$ or negatives?
If the next token prediction machine doesnt live up to the hype, this is going to be one massive bubble.
Sorry if this appears obtuse, but what exactly is an “AI Data Center”?
Is it a data center with nothing but GPUs, that does nothing but inference all day and all night?
Is it a data center custom-built for only AI companies to use?
Do these “AI Data Centers” have data storage? VPS? …
Or, as I suspect, is “AI Data Center” simply a fake media buzzword that really means “Normal Data Centers” but with political baggage and stigma built-in.
They should offload the overprovisioned, hyper concentrated GPUs back to the people
This tracks with recent reporting that AI debt issuance fell 50% month over month in September[0]
> Tech companies raised $23 billion in AI-related debt globally in September, less than half the amount raised in August, according to Morgan Stanley data covering public bonds and private placement transactions.
> The decline marks a continued drop from June, when companies raised a record $113 billion for AI infrastructure including data centers and chips. In the US investment-grade market, where blue-chip tech groups borrowed around $306 billion between January and August, AI-related bond issuance stopped completely last month.
0: https://www.investing.com/news/stock-market-news/tech-compan...
Oracle data enter debt.
'nuff said.
This is completely normal. Banks underwrite large loans and then package a bunch of them in different ways to sell to different investors.
slop
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The CDSs on some loans are getting to the point where it’s too expensive to even bet that the loans will fail as the CDS market seems to have concluded the loans will fail.
To be fair to banks this is what they do with almost all debt their underwrite.
They hold it to help stabilize the market for it while its being sold and then offload it once the market has been established.
Nothing out of hte ordinary here, but to be fair the original article isnt' a financial site so they would have no real idea about how this work behind the scenes.
This doesn't seem like a story at all given how robust this debt is trading.