AI fundraising eats capital like a debt machine... yum yum, gotta snack!

I’ll say from the start that I’m not saying this is necessarily good or bad, as such. Just that a really important part of the financial system is getting a complete do-over, mid-flight, and probably not enough people are thinking about what it all means. That part of the financial system is the corporate bond market, and the revolution is at the hands of the Big Tech behemoths that are tapping into it on an absolutely mind-bending scale.

"the gist is that the hyperscalers have cut their reliance purely on free cash flow to pay for all their AI widgets and have instead turned to the debt markets."

We know a thing or two about that from Bitcoinland. Saylorbois have shown the way! (Next up. AI preferred shares!!) Print shares, not money #1544738

this is all bending the credit markets in some very weird directions. One of them is tenors. The average weighted tenor in US IG is 10.7 years, Goldman says. In the issues from big tech companies, however, a fifth comes with an average tenor of more than 14 years and among the big-five hyperscalers, it’s more still, at 16.5. This all means that credit investors have to totally rethink their sectoral concentration if they want to avoid the fate of stock indices that often look and smell like active tech funds.

interesting, interesting!

As a long-awaited scaling up of a dusty market, of indices, of hedging practices? Or as a regrettable crowding out in debt markets by Big Tech? Perhaps all of that at the same time.

"this market is transforming before our eyes."

archive: https://archive.md/gZuzX