Big Tech is borrowing like never before(startupfortune.com) |
Big Tech is borrowing like never before(startupfortune.com) |
NVIDIA raised $25 billion and had $85 billion in orders. Because of the demand, it was able to upsize its offering and issue bonds in maturities ranging from 2 to 30 years at quite favorable interest rates. The amount raised is a quarter of a year's free cash flow and the spread tightened during the book building process, so bond investors obviously aren't on the same page as the author.
You really can't make a bearish argument about the amounts being raised without putting the numbers in perspective. Yes, the issuances are big, but the equity and cashflows are also big, so the amounts being raised in the bond market don't really align to the author's skepticism when it comes to NVIDIA, Google, Meta.
The author would have a stronger case with Oracle but that alone wouldn't support the "Big Tech" story line.
Edit: $25 billion is a quarter's worth of free cash flow for NVIDIA, not half a year's as I originally stated.
Actually I misspoke in my original comment. NVIDIA has about $100 billion/year of free cash flow. So $25 billion is a quarter's free cash flow, not a half a year's.
$25 billion of debt against a $5+ trillion equity value and ~$100 billion of annual free cash flow barely moves the needle on equity beta or default risk.
It's still not super huge compared to the amount of debt in other industries, but I guess the thought is it's riskier?
We spent this much (without adjusting for inflation), in 5-10 years on telecom build out in the lead up to the dot com crash. I'm fairly sure that there is still leftover capacity in the ground (dark fiber) today that we can leverage.
Smell like a bubble yet?
Looking back to that pre 2000's era, SUN was running on 50% margins, Cisco at 68%
Nvidia, 70% (and MS openly admits that they have GPU's on shelves not making money: https://www.datacenterdynamics.com/en/news/microsoft-has-ai-... ) Micron (memory) 70%, SK Hynix (SSD's) 70%.
For as much fun as the dot com bubble was, for as hard as the pop was, what came after was MUCH better. This burst is going to be brutal, and the sooner it happens the sooner we can move on to actual (sane) innovation, that leverages this build out.
If there’s any financial risk then it may not be worth the potential loss of control.
If your company trades at 100x sales you should probably sell the equity.
I also notice the article is "tagged" as if its title had been split on lowercase 's'es:
> Big tech i
> borrowing like never before and the fed ju
> T made that a lot more expen
This level of attention to detail does not exactly inspire confidence.
This sounds like AI (Claude).
The article has a lot of AI fingerprints, and reads like it was mostly AI written with a human editing round.
https://www.reuters.com/business/media-telecom/spacex-banker...
https://pivotal.substack.com/p/minsky-moments-in-venture-cap...
Frontier labs will be considered essential to national security, Microsoft is basically a public utility at this point, Facebook is too important for the spread of propaganda (although this one has less of a case/justification for a government bailout), Amazon (via AWS) runs massive parts of the federal gov (along with Azure), Google dying would cause almost an immediate global depression (73% of mobiles run android, the massive ad network).
These companies are so entrenched in day to day operations and into the economy that they cannot fail without ushering in whats effectively dark ages 2.0
AI labs would be a lot worse. A lot.
Interest payments on US Debt are already $1T annually. If GDP stops growing faster than the interest rate on the debt, we're "cooked" as the kids say.
If we lose reserve currency status, we are equally screwed.
A big tech bailout isn't going to look like a big cash injection. It would look more like total asset seizure and nationalization of those companies.
The best thing you can do is diversify assets to be prepared for that scenario, so you do not fall into the hell of a permanent underclass, in perpetual servitude.
It means "if they fail, goverment will bail them out claiming their failure would take out the whole economy".
If we didn't have food, you'd have a point. If factories weren't churning out more stuff than anyone knows what to do with - you'd have a point.
All this is is a bunch of incompetent, spoiled idiots in positions of power that will sooner or later have to make room for people who know what they're doing.
Nobody in this globalized economy is interested in things no longer working - even the incompetent idiots. All that has to happen is 60+ year old retards who thought they were going to move up the power ladder because 'seniority' will need to go fuck off and play golf and their children will need to go fuck off and work in lower middle management.
That's all.
Of course they spend billions every year telling you otherwise. Their other big lie is that we can't tax anyone or do anything because 'they will just leave' or 'China' or 'USSR' or 'terrorism' or some other bullshit. It's all bullshit, it's been bullshit and it will continue to be bullshit until you turn your brain on for 2 minutes and realize it's either retards in charge or not - the rest is talk.
The real impact of Google going dark though is less Android and more ads. Google fails, the revenue pipeline for 2 million + websites goes to zero overnight, and millions of digial businesses and agencies will go bankrupt within weeks. It would completely collapse the business model of the modern internet.