01:01:22 · John Coogan
[01:01:22] S0: Mhmm. Yeah. This this breakdown here. So the the Wall Street Journal is slicing up how the next three years will look based on projected global spending on data centers by financing source. So of 2,900,000,000,000.0, which is estimated over the next three years, I guess, four years. Tech companies will cover 1,400,000,000,000 of it. Private credit will cover 800,000,000,000 of it. Corporate bonds, 200,000,000,000 of it. Asset backed securitization, one fifty. Private equity, another $3.50. And to me, this looks like a very healthy way to actually finance this. This feels like it's not if it was like, if we were looking at this, if you broke down we've been through a $2,000,000,000,000, like, bubble before, and it collapsed very rapidly. What was that? It was, like, the meme coin era. And who and how did we break that down? It was not it was not the the cash flows of the most profitable companies in the world that were buying the long tail crypto assets. It was retail. And so the fact that this is, like, pretty removed from retail feels, like, safe to me. It's much safer than Sure. Than getting a a huge bubble inflated in, oh, everyone has to get in on the latest coin, and they're all nonsense. Like, there will be nonsense deals. We're already seeing nonsense, AI companies, and there certainly will be projects that get financed that Yeah. They just cannot build
01:02:59 · Jordi Hays, John Coogan
[01:02:59] S1: that approved. Say using the excuse like, well, at least this isn't retail getting hosed doesn't hold up that well when you think, okay, the alternative is like large institutions, insurance companies, pension funds that are also financing this, which is effectively [01:03:16] S0: I'm talking about the fragility. Necessarily where where where the where the financial pain or who the who the person ultimately pays for it. If there is a pullback, it's like how fast can that pullback happen. Right? Because if if, it like, if the write downs if there's something that goes wrong and the write downs come out of tech companies' cash flows, that's just not as big of a deal as as everyone waking up and and just slamming the sell button. It's just a very different, it's a it's a very different set of dominoes. Like like the dominoes of, like, the the the interest rate crisis, the NFT crisis, like, FTX blowing blowing up, all that stuff. Like, that those dominoes were spaced right next to each other. And so as soon as one went over, it was like the next person has their finger over the sell button. Their next person has their finger over their sell button. Whereas if you're like, yeah. I'm a tech company, and I produce, you know, $50,000,000,000 of free cash flow and, oh, yeah, I'm not getting a great return on the 20,000,000,000 of free cash flow that I earmarked over here for the next few years. It's bad, but it's not as calamitous.
01:03:16 · John Coogan, Jordi Hays
[01:03:16] S0: I'm talking about the fragility. Necessarily where where where the where the financial pain or who the who the person ultimately pays for it. If there is a pullback, it's like how fast can that pullback happen. Right? Because if if, it like, if the write downs if there's something that goes wrong and the write downs come out of tech companies' cash flows, that's just not as big of a deal as as everyone waking up and and just slamming the sell button. It's just a very different, it's a it's a very different set of dominoes. Like like the dominoes of, like, the the the interest rate crisis, the NFT crisis, like, FTX blowing blowing up, all that stuff. Like, that those dominoes were spaced right next to each other. And so as soon as one went over, it was like the next person has their finger over the sell button. Their next person has their finger over their sell button. Whereas if you're like, yeah. I'm a tech company, and I produce, you know, $50,000,000,000 of free cash flow and, oh, yeah, I'm not getting a great return on the 20,000,000,000 of free cash flow that I earmarked over here for the next few years. It's bad, but it's not as calamitous. [01:04:24] S1: And I think going back to this quote from David Einhorn, he says, what we do know for certain is that the big tech companies that want the world to spend trillions have huge financial incentives to be believers. In case you haven't noticed, Wall Street is also being paid a lot to promote the story. And in that same letter, Einhorn and Greenlight said, this was this was the AI math makes no sense.
01:04:24 · Jordi Hays, John Coogan, Stacy Rasgon
[01:04:24] S1: And I think going back to this quote from David Einhorn, he says, what we do know for certain is that the big tech companies that want the world to spend trillions have huge financial incentives to be believers. In case you haven't noticed, Wall Street is also being paid a lot to promote the story. And in that same letter, Einhorn and Greenlight said, this was this was the AI math makes no sense. [01:04:50] S0: Mhmm. [01:04:50] S1: It was basically the way it is today. Consumer business spends $1 on a ChatGPT subscription, is OpenAI revenue. Yeah. Then OpenAI provides the service by spending $2 on Microsoft AI infrastructure, which is Microsoft revenue. Then Microsoft spends $0.60 leasing GPUs from CoreWeave to handle the compute load, which is CoreWeave revenue. And then CoreWeave spends $2.4 on chips from NVIDIA and another $2.4 [01:05:18] S0: Yes. But you're completely discounting exactly how addicted the four point zero user is. They will pay any amount. So let's say that it's it costs $20,000 a day to serve a four o user, they will find the money. They will be stripping copper out of empty buildings to pay for their four o bill if they have to. They will be they will be Whatever [01:05:41] S1: it takes. [01:05:42] S0: They will be they will be breaking into cars to to sell stolen CD radios. [01:05:50] S1: Yeah. It is it is notable that Blue Owl has sold off 16% [01:05:55] S6: Mhmm. [01:05:56] S1: Past month. So even during this sort of like boom in lending Mhmm. It's not they're not getting very much credit for it.
01:05:56 · Jordi Hays, John Coogan, Tyler
[01:05:56] S1: Past month. So even during this sort of like boom in lending Mhmm. It's not they're not getting very much credit for it. [01:06:04] S0: Yeah. It's an odd it's an odd time. Like, there's still so there's still so many things that are working. The the results from that newcomer event, the AI is, Cerebral Valley, where he he had every it's so good. He he took, like, a straw poll on stage and asked everyone, like, who do you wanna short? And everyone said perplexity. So, like, he didn't really have to say, like, I'm shorting perplexity. He just was able to, like, take the temperature and sort of maintain, like, you know, some, arm's length distance to it while still, like [01:06:37] S2: Yeah.
01:06:37 · Tyler, John Coogan, Jordi Hays
[01:06:37] S2: Yeah. [01:06:38] S0: Getting the take out there. But everyone was saying that they wanted to buy more OpenAI, more Anthropic, more Andoril, a few other names came up, I believe. And and there's still, like, an incredible amount of bullishness in a lot of different areas. But, I think, yeah, people are still still worried about some of the some of the other stuff. But at at the same time, it feels like there's so many companies that have, like, gone through a they've gone through the AI pump and round tripped, not just Oracle, but even, like like, Klarna was going through the whole, hey. We're gonna get so many efficiencies out of AI, and then it came back to normal. But then they still got out, and it's, like, a reasonable company that's not, like it's not zeroed. Right? It's like, oh, yeah. Their business is just what it was before the AI boom, and they are not getting, like they didn't get moved up or down. And so there's just, a ton of companies that are like that. Where is Klarna since the IPO anyway? [01:07:37] S1: They're sitting, at around a 12,000,000,000 valuation, 12.6. Down Down. 20%? Yeah. Down 20 [01:07:46] S0: doesn't seem calamitous to me. That seems like pretty, like, solid. Like, I don't know, the overall market's quarter kind of, you know, up and down. I don't know. [01:07:57] S1: Affirm, on the other hand, is up 28%. [01:07:59] S0: How's Affirm doing? Up [01:08:00] S1: 28% Okay. In the [01:08:01] S0: past six months. In the past six months. [01:08:03] S1: They're getting Today