The AI bubble is bigger than you think
2 days ago
- #Financial Crisis
- #AI Bubble
- #Private Credit
- Wall Street and Silicon Valley are competing in areas like banking apps and 401(k) plans, but also collaborating on risky credit deals.
- Private credit, a rebranded form of shadow banking, is fueling the AI buildout with $1.6 trillion in assets under management, despite warnings of a bubble.
- Special Purpose Vehicles (SPVs) are being used to finance AI infrastructure, like data centers, with Big Tech firms as anchor tenants, masking debt risks.
- Private credit funds like Blue Owl are circumventing regulations, raising concerns over financial stability and potential crises.
- Data centers and GPUs are depreciating faster than admitted, leading to overstated revenues and potential financial disasters.
- Securitization of data center loans into asset-backed securities is growing, with 61% of applicable securitizations coming from data centers.
- The AI bubble is compared to past financial bubbles, with concerns over insufficient cash flow to justify the massive investments.
- Banks and private equity are heavily involved, with banks holding $300 billion in loans to private credit, raising fears of a broader financial crisis.
- Ordinary retail investors with 401(k) plans could be left holding the bag if the bubble bursts, alarming financial policymakers.
- Figures like Peter Thiel are quietly distancing themselves from these investments, signaling growing skepticism and potential economic fallout.