Oh, we're doing this again, are we?

Ugh. A year ago, I was (a) fairly confident that the AI bubble would burst, but (b) fairly confident that contagion would be limited; a bunch of startups would evaporate, and some VCs would be badly burned or fail, but the broader economy would largely shrug and carry on.

Based on this sort of thing, I'm not sure I still believe (b).

Pimco - the company that originated all those bonds every pension fund is sitting on.

The sums being thrown around right now are just staggering. All the money that is being leveraged for AI these days is going to absolutely crush some unlucky sods somewhere. All these massive deals can’t all succeed.

Louisiana residents better expect higher energy costs soon as well that’s for sure. No way entergy is content eating the costs of these investments and the state basically has an allergy to taxing or in any way financially inconveniencing companies.

The way things typically go in LA the only guarantee is the residents will be on the losing end in some form or fashion (also many politicians are probably skimming off plenty for themselves and their buddies). Especially with Landry at the helm.

Seems like a stable investment with returns locked in through 2049 unless Facebook defaults.

Hence the big push currently ongoing to allow 401ks to invest in private markets

It’s private money, like if you went and asked your uncle for a loan.

It’s complicated.

Old GPUs (ex hopper, A100) prices has been dropping but the new ones will go up.. so yes it doesn’t need to crash for you to have cheaper gpus

The way the recent deals have been structured is that the capacity and thus revenue is pre-booked, which upgrades the credit quality in the eyes of the lenders. Blue Owl is private equity, so they are likely loading the special purpose vehicle itself with the debt (in a way that it off Meta's balance sheet, which is the primary objective), and then possibly funding the capital outlay through secondary markets (if not now, then perhaps later they can bundle it up and sell it - it's Meta adjacent so they will have no problem selling on that debt).

If Blue Owl is providing capital for an equity slice, they get huge leverage on their cut baked into the deal. Pension funds that may end up buying debt in the deal eventually don't want to actually fund the equity of the project and take the risk booting it all up while sitting at the front of the capital stack with corresponding risk of getting wiped out (even if it's a Meta partnership), they simply want securitized fixed income, and make it as vanilla as possible.

So the question is more "will Private Credit (or pension funds/institutions) take debt backed by datacenter collateral with long term service agreements with Meta" and the answer is yes. There is much lower quality stuff than that in the PC space.

Too much money chasing too few investment opportunities with large potential returns. Risk really isn't being acknowledged these days.

$30B ... 2GW datacenter ... ??? ... AGI

Isn't the first rule of business that you spend other people's money, whenever possible?

The article is poorly written. This deal is mostly debt financing with only a little bit of equity.

In terms of corporate capital structure, shareholder returns are usually maximized by taking on at least some debt (leverage). The precise optimal proportion of debt depends on several factors, particularly credit rating.

Make the numbers look better? There must be benefits of moving these numbers from column to some other column. Or even partially hiding them. Thus allowing stock to be priced higher based on some metric...

if you have $100M and you need a $1M, you'd use your credit line and borrow $1M and pay it back from interests coming from $100M. it's not that different in corp.

Dump risk on others

> structured in such a way as to keep the debt off of the Social Network's balance sheets

> "As we learned in December, Meta has commissioned a new natural gas generator plant to be built by local utility operator Entergy. At least for the initial build out, the gas plant would employ three combined cycle combustion turbine generators with a total generative capacity of over 2.2 gigawatts."

Nope, they're not betting on connecting to the grid. They're going to burn natural gas / shale oil.