US tech giants' hidden AI debt swells 90% to $3.2T in 6 months

I very much hope this, and other threads on the financially insane behaviour of the tech sector get more surface. I don't think having this die in "new" is helpful because this stuff, the norms of how business looks at the balance sheet and decides what is, and is not rational business investment, this stuff is -> important <-

This is a significant proportion of the market. Having this amount of money not understood is harmful.

THIS IS NOT DEBT. With debt you are given money that you can spend, and then you have to pay interest for a while and then return all the money you spent.

These are signed contracts for future spending. However, we don't know what the terms are for those contracts and how easy it is to get out of them. For example, with Anthropic and Google's contracts with xAI's compute, they signed a long term contract, but they can get out of the contract with 3 months notice. That isn't a good indication of future spend. The same goes for all of these $3.2T, so these numbers are sus at best.

The company budgets cannot sustain this. Behemoths like Google and Amazon with insane balance sheets are now on their knees begging for loans.

We (as a country) should contain our exposure to this insanity. If companies want to go bankrupt let them go, but we cannot strangle the liquidity of the entire market to feed the ambitions of these handful of companies.

This wouldn’t be a huge issue if they had the cash to pay for it. The problem is they don’t so these companies that once had great free cash flow are now down on their knees begging for cash.

In the higher interest rate environment we’re heading into this is a potential disaster. For the new players like Anthropic and their likely “junk” credit rating this is going to be incredibly painful. It’s basically like playing in a casino on margin. If it works, great. If not you are totally f*ked.

This is quite misleading. It includes numbers for commitments for leases of data centers and payments for power that are decades into the future.

Even if AI completely busts and all of these servers are worthless that doesn't mean the data centers are. There's still a need for data centers to host non-AI servers. The hyperscalers will close/sell other data centers and serve from places where they have long term commitments at.

3.2 trillion sounds like a lot until you spread it over 20 years and half a dozen trillion+ dollar companies. It's hard to tell how much a bag they're holding but it's almost certainly negligible compared to revenue and market cap. The only real systemic risk is the risk of for some reason not needing any data centers.

All these special purpose off balance sheet things always smelled bad to me. Here’s hoping it blows up and takes all of it down 50 percent or more. Heck go 99% down. I’ll buy everything I can get my hands on.

I do wonder why HN thinks it understands risk better than the people hired at multi trillion dollar companies whose whole sole job it is to understand and minimize these risks - people who also understand the company way better than anyone on HN.

Is it possible that these companies feel they have more to lose by missing out on AI than by taking on debt? Or that they genuinely are in a race to superintelligence, which easily justifies this debt and far more?

When I worked at Apple, I remember seeing the commentariat insisting that <project> was bound to fail, that we didn't know what we were doing. When in fact extremely competent people knew precisely what they were doing. Of course, the commentariat were wrong and I'd wager most of them use what I had a part in building. The same story tended to repeat across my subsequent jobs in big tech. All this seems quite similar to me.

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