Broadcom, SpaceX and Oracle’s AI debt spree: Is AI crowding out the market?

You know, we joke here every morning, h what's another 50 billion dollars? We wake up and it's another 50. What's another hundred billion? And then we woke up this morning and what did we get? Broadcom is planning, the Wall Street Journal reporting, $50 billion in financing for OpenAI to buy chips. Uh this comes after we got headlines that Broadcom is also helping finance $60 billion for Anthropic. We got the news yesterday or maybe the day before that SpaceX is raising 40 billion in debt to buy Nvidia chips. >> That was just yesterday. >> That was just yesterday. How fast this was. Oracles in talks with Apollo and Goldman. The amount's not uh out there yet, but to finance chip purchases. >> If you are trying to issue into this market, where do you put your money? Look at how crazy this is getting. >> You know what I wondered about when I was looking at these headlines this morning? When we talk about the crowding out effect, >> ridiculous. >> Where else is it showing up? Is, you know, there's been a lot of talk about it happening in the Treasury market, but when you see also IPOs >> not happening into this market, is that the crowding out effect? Is that investors saying like >> enough? I'd rather go >> um buy this chip debt, this compute debt, >> you know, at whatever yield than buy this what I consider to be an overvalued IPO and participate in that. Maybe that's part of I mean I don't know if it's the same investors right but institutionally it's the same end buyers and are they in some cases making some of these um decisions at the same time in the private market >> there doesn't seem to be much evidence of difficulty no in raising money >> openai is now doing another round >> yeah fine exactly exactly >> it's kind of like when the spigot cuts off then they'll stop trying to issue debt right now spigot's open so there's still open as much we're seeing it get in now. >> Um but then on the flip side, we we talked about this what's happening the debt that's already out there, right? So SpaceX CDS spreads are widening, right? So that's a measure of of the insurance for the for the debt. Um Oracle bond yields are rising. Their CDS are record high. Um Meta's hype bonds behind Meta's Hyperion data data center hit a record low, right? So the issuance is already out there is not doing so well, right, once they get out the door. And it's, you know, not really a problem, I guess, for for SpaceX and these guys once once they got the money already. But it doesn't not a good look. You're going to raise again which SpaceX is trying to do. And again, you know, I think you noted yesterday they raised right out after the IPO, >> right? They just had a big IPO. Like, okay, let's go to debt markets now. Um, so that's a little bit of a concern there. Are people concerned about that the buildout's not going to happen as fast or that these companies won't pay when it when the bill comes due, right? Is is that is what's the concern for behind this debt sort of not doing so well in the secondary market? >> Well, that's part of the question, right? That nobody's doubting the demand side story. Yes, clearly the demand is there for this debt because they're keep being buyers. We can talk about crowding out all we want. Where's the crowd crowded out money going? It's going into the AI trade. That's why everything else is getting crowded out. But the question is duration. How long can this go on without any kind of crack or >> that's the thing cash flow. >> Yeah, >> it's all right. Like that's the concern like who can get that cash flow >> most quickly to pay back >> the debt >> which is what we keep saying. Who's going to be left holding? >> I want to read something that box CEO Aaron Levy wrote about about this whole cycle, right? He said the compute needed for the a stage of AI we're at right now is going to be quote insane. Personal agents, agent swarms defending enterprise, agents that review all our code for security issues, agents that process nearly all enterprise data and workflows, background agents, etc., etc. We're going to need that mix of inference volume, right? That's what he's talking about. So, that's the bullish side. We need we need more. We're going to have so much demand. Uh my concern is that you guys haven't actually explained why we need this. Like, why do we need the bots? Well, they need to we need cyber security protection from other bots that like it's like it's building both sides of the equation. >> Well, that's been something that I've talked I talked about when we first got the AI push is that it was a push, not a pull, >> right? >> In other words, it felt like it was something that this that the sellers were saying you need this and everything is going to that there was this air of inevitability to it all and there still is that. Absolutely. Now, if you talk to companies both large and small that have used these AI tools to great effect, they're super impressed by them frequently. It's helping them. >> Um, that said, I do think it's like it's just going to be lumpier [clears throat] >> and slower to adop be adopted. >> The push versus pull, I'm sorry. >> Yeah. Than that than the bullish uh >> it really reminded me of the EV situation in this country. Three, four years ago, >> manufacturers were pushing EVs on this is the future. >> And for one reason or another, consumers weren't necessarily buying so strongly and that led to a big sort of come to Jesus moment with the industry being like we're writing down 18 to$20 billion each in costs or loss whatever charges. This is not working out >> is I'm not saying it's going to happen here, but it was because of that whole like it's not like there was organic demand. I want I want EV. I want EV. That wasn't necessarily happening at a high mainstream level, >> right? And I think and I think people in the AI industry will say the demand is happening >> and on the financing side it is there admittedly like we see it on the financing side >> right but that's not the demand that we're talking about >> and well to this is this is where I want to come back around to to quote you Julie nobody likes hoisting