This law firm memo provides a fairly detailed overview of the risks inherent in the "AI" finance bubble and it doesn't look good
> The deeply interconnected AI ecosystem means that distress at any single node—a construction delay, a tenant default, unhedged energy cost differentials, a collapse in GPU resale values—can propagate across multiple counterparties and financing layers.
This is fine, right?
> Data center debt has increasingly been repackaged and sold to a wider pool of investors through asset-backed securities (“ABS”) and commercial mortgage-backed securities (“CMBS”).
This has never backfired, right?
> In a role reversal, this year Moody’s has warned that AI data center investments may be riskier than they appear, as current U.S. accounting rules allow companies to conceal tens of billions in potential liabilities. Moody’s noted that reported liabilities may understate likely cash outflows
No worries there, right?
> The interaction between the two collateral layers creates a cascading risk. If GPU collateral loses value, the neocloud tenant cannot service its debt, which impairs the tenant’s ability to make lease payments to the data center SPV, which in turn undermines the cash flows backing the data center ABS that investors are relying on.
and
> ...if it materializes at scale, would propagate losses across every layer of the financing stack.
Oh joy.
Baldur Bjarnason
your auntifa liza 🇵🇷 🦛 🦦
sleet01