AI Apocalypse Now ... Pay Later
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| Google Gemini AI generated |
This week in Ai Finance
REUTERS - George Catrambone, head of fixed income, Americas, at DWS, said
investors are beginning to demand larger concessions as debt issuance volumes
reach record levels.
AI hyperscalers'
debt issuance has reached $220 billion in 2026, according to the latest BNP Paribas data as of August 10. That
is roughly $207 billion higher than in the comparable period last year, when it
totaled $12.5 billion.
Analysts said Alphabet's bond offering earlier this month was well received, but still required a concession of roughly 10 to 15 basis points relative to existing bonds.
Many pension and insurance investors cap exposure to individual issuers at roughly 2% to 3% of assets. Those limits become increasingly important.
Moreover, Reuters writes, diversification is important to clients and that many "don't want to open a statement and find they own 10% of one bond," highlighting the portfolio constraints that could eventually limit demand.
Peter Berezin,
@bcaresearch, BCA Chief Economist writes that as tech giants project to hit
heavy annual capital spending, their long-term asset bases will reach trillions
of dollars. As background: Accounting for annual depreciation and targeting
standard pre-tax returns on invested capital forces companies to aim for
massive operating profits. Hyperscalers will be challenged to justify the
spending. The I market revenue need to accomplish this would be comparable to the entire world's annual spend on food.
https://x.com/peterberezinbca/status/2090766636852641981?
Republican governors, mere months after high-tout announcements of future data centers, are tracking back as public resistance to more data centers grows more robust. One hears of moratoriums on building, even in places where no plans exist. This may demand another turn around for the aggressive Trump administration.
Writes Gary Marcus:
"Trump himself hasn’t entirely bolted — yet — but he’s certainly changed
course sharply, moving from full anti AI regulation to strongly encouraging the
voluntary preflight testing of frontier AI models."
https://garymarcus.substack.com/p/breaking-the-republican-party-is
Thanks to Google
Gemini for contributing the headline. -B.B.
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