5 ms·

Big Tech is borrowing like never before

64 points by krupan 4mo ago

carterschonwald 4mo ago
“sit with” is way over used lately
- ElProlactin 4mo ago
  > That is the part investors should sit with. This sounds like AI (Claude). The article has a lot of AI fingerprints, and reads like it was mostly AI written with a human editing round.
greenoracle9 4mo ago
[flagged]
dgellow 4mo ago
Full title: "Big Tech is borrowing like never before and the Fed just made that a lot more expensive"
- zahlman 4mo ago
  Which is strange, because they did not in fact implement a big (or any) increase in the federal funds rate. I also notice the article is "tagged" as if its title had been split on lowercase 's'es: > Big tech i > borrowing like never before and the fed ju > T made that a lot more expen This level of attention to detail does not exactly inspire confidence.
  - iwontberude 4mo ago
    And they are expanding money supply like crazy and not too long ago ended quantitative tightening.
  - dgellow 4mo ago
    Yeah, that does look pretty low quality and doesn’t really make sense. However from what I understand it is expected for rates to increase by end of the year
xnx 4mo ago
Smart to borrow when money is cheap if you think you can do something more profitable with it.
- mathattack 4mo ago
  If you’re profitable and can pay it back, it’s better than equity. If there’s any financial risk then it may not be worth the potential loss of control.
  - adam_arthur 4mo ago
    Would depend on the yield on debt vs yield on equity (factoring in earnings growth rate) If your company trades at 100x sales you should probably sell the equity.
    - mathattack 4mo ago
      It’s not just yield. Its debt gets paid first. And if you miss the interest payments the debt holders get the company.
      - spwa4 4mo ago
        If you mean that taking out any kind of debt is fundamentally a bet that whatever is being put up as collateral will grow faster than the interest rate? Because if it doesn't the risk that suddenly debt holders control you grows by a lot. Yes, absolutely. So, applied to GOOG, Alphabet Management is betting they will grow more than 4.5% per year at least until 2030. There is also some weirdness, like Alphabet making a 500 million USD bet short term USD interest rates will be lower than 4% over the 2025-2028 period.
        mathattack 4mo ago
        Sort of. They can use the debt to grow, in which case they’re betting that they will get more profit than the principal plus interest payments. (Beating a 4% return on the loan, not the whole company) They could also use it to change the capital structure buying back shares. This simultaneously increases risk and share price, unless the reissue more shares. In both cases, if they can’t pay the interest payments, the company gets handed over to the creditors. Not an issue for Google, but a lot of startups struggle with venture debt.
Mistletoe 4mo ago
A good read when X is "borrowing like never before". https://pivotal.substack.com/p/minsky-moments-in-venture-capital https://pivotal.substack.com/p/minsky-moments-in-venture-cap...
smrtinsert 4mo ago
Is it me? I feel like we are entering an era where it has become possible for one of the big companies to fail.
- fhdkweig 4mo ago
  After the bailouts of 2008, I think the only thing to fear is that the US government will fail first. As long as they can afford to keep big businesses going, they will. Whether things will get bad enough that the government can't afford to do that is an exercise to the reader.
  - deadbabe 4mo ago
    US Government won’t fail. They can certainly just default on all debt and keep on going like many other countries. It will be a shitty country going forward, but not a failed one. The best thing you can do is diversify assets to be prepared for that scenario, so you do not fall into the hell of a permanent underclass, in perpetual servitude.
    - dgellow 4mo ago
      The US defaulting would easily trigger the worst economic shock the world ever experienced. Other countries that defaulted weren’t the hegemonic power
  - thewebguyd 4mo ago
    I mean, we are approaching the point where the government can't afford to do that. Debt is near $40 trillion, and debt held by the public has recently just slightly tipped over 100% of the US GDP, so we are long past affordability. Interest payments on US Debt are already $1T annually. If GDP stops growing faster than the interest rate on the debt, we're "cooked" as the kids say. If we lose reserve currency status, we are equally screwed. A big tech bailout isn't going to look like a big cash injection. It would look more like total asset seizure and nationalization of those companies.
    - 4mo ago
dmoy 4mo ago
$500B is a lot of debt, it's comparable to the three largest car companies' debt. It's still not super huge compared to the amount of debt in other industries, but I guess the thought is it's riskier?
- vb-8448 4mo ago
  Debt is directly tied with the ability to repay it, if the cash flow is enough to keep paying it, it's not a big issue, but thing can go horribly pretty fast if someone start having cash problems.
- zer00eyz 4mo ago
  500B on software would be a lot. On infrastructure, it really isnt. We spent this much (without adjusting for inflation), in 5-10 years on telecom build out in the lead up to the dot com crash. I'm fairly sure that there is still leftover capacity in the ground (dark fiber) today that we can leverage. Smell like a bubble yet? Looking back to that pre 2000's era, SUN was running on 50% margins, Cisco at 68% Nvidia, 70% (and MS openly admits that they have GPU's on shelves not making money: https://www.datacenterdynamics.com/en/news/microsoft-has-ai-gpus-sitting-in-inventory-because-it-lacks-the-power-necessary-to-install-them/ https://www.datacenterdynamics.com/en/news/microsoft-has-ai-... ) Micron (memory) 70%, SK Hynix (SSD's) 70%. For as much fun as the dot com bubble was, for as hard as the pop was, what came after was MUCH better. This burst is going to be brutal, and the sooner it happens the sooner we can move on to actual (sane) innovation, that leverages this build out.
  - jayd16 4mo ago
    Certainly doesn't feel like the 90s bubble from main street USA. I'm not sure if that means a burst will be softer or much harder on the middle class.
  - mikewarot 4mo ago
    >the sooner it happens the sooner we can move on to actual (sane) innovation, that leverages this build out. Unlike dark fiber which retained value, GPUs and compute hardware rapidly becomes obsolete. It won't make sense to use anything more than 4 years old, as performance and especially energy efficiency will have improved in that time. I wouldn't count on getting significant value out of the debris of the coming data center implosion. Copper thieves are likely the only ones who might, but there will likely be a glut and the risk likely won't be worth it for even them.
ElProlactin 4mo ago
The NVIDIA case is such a strange example to use to make the argument the author is trying to make. NVIDIA raised $25 billion and had $85 billion in orders. Because of the demand, it was able to upsize its offering and issue bonds in maturities ranging from 2 to 30 years at quite favorable interest rates. The amount raised is a quarter of a year's free cash flow and the spread tightened during the book building process, so bond investors obviously aren't on the same page as the author. You really can't make a bearish argument about the amounts being raised without putting the numbers in perspective. Yes, the issuances are big, but the equity and cashflows are also big, so the amounts being raised in the bond market don't really align to the author's skepticism when it comes to NVIDIA, Google, Meta. The author would have a stronger case with Oracle but that alone wouldn't support the "Big Tech" story line. Edit: $25 billion is a quarter's worth of free cash flow for NVIDIA, not half a year's as I originally stated.
- krupan 4mo ago
  What are you assuming the author case is? The article points out that by normal logic these companies are overvalued and so owning their stock is risky. Now that they've taken on all this debt, it's even riskier.
  - ElProlactin 4mo ago
    The words "valuation" and "overvalued" appear exactly 0 times in the post. The author didn't make the argument you're claiming. Actually I misspoke in my original comment. NVIDIA has about $100 billion/year of free cash flow. So $25 billion is a quarter's free cash flow, not a half a year's. $25 billion of debt against a $5+ trillion equity value and ~$100 billion of annual free cash flow barely moves the needle on equity beta or default risk.
    - krupan 4mo ago
      [dead]
0xcafefood 4mo ago
https://www.inc.com/fast-company-2/oracle-ai-boom-hidden-debt-nvidia-jensen-huang/91357055 https://www.inc.com/fast-company-2/oracle-ai-boom-hidden-deb... goes into more detail about this same issue.
krupan 4mo ago
And now SpaceX, who is not at all in the same financial situation as Nvidia, wants to borrow money too: https://www.reuters.com/business/media-telecom/spacex-bankers-prepare-bond-sale-least-20-billion-bloomberg-news-reports-2026-06-18/ https://www.reuters.com/business/media-telecom/spacex-banker...
- RetroTechie 4mo ago
  Ofcourse xAI brought under SpaceX's umbrella has nothing to do with that.

64 points by krupan 4mo ago

carterschonwald 4mo ago

“sit with” is way over used lately

ElProlactin 4mo ago
> That is the part investors should sit with. This sounds like AI (Claude). The article has a lot of AI fingerprints, and reads like it was mostly AI written with a human editing round.

greenoracle9 4mo ago

[flagged]

dgellow 4mo ago

Full title: "Big Tech is borrowing like never before and the Fed just made that a lot more expensive"

zahlman 4mo ago
Which is strange, because they did not in fact implement a big (or any) increase in the federal funds rate. I also notice the article is "tagged" as if its title had been split on lowercase 's'es: > Big tech i > borrowing like never before and the fed ju > T made that a lot more expen This level of attention to detail does not exactly inspire confidence.
- iwontberude 4mo ago
  And they are expanding money supply like crazy and not too long ago ended quantitative tightening.
- dgellow 4mo ago
  Yeah, that does look pretty low quality and doesn’t really make sense. However from what I understand it is expected for rates to increase by end of the year

xnx 4mo ago

Smart to borrow when money is cheap if you think you can do something more profitable with it.

mathattack 4mo ago
If you’re profitable and can pay it back, it’s better than equity. If there’s any financial risk then it may not be worth the potential loss of control.
- adam_arthur 4mo ago
  Would depend on the yield on debt vs yield on equity (factoring in earnings growth rate) If your company trades at 100x sales you should probably sell the equity.
  - mathattack 4mo ago
    It’s not just yield. Its debt gets paid first. And if you miss the interest payments the debt holders get the company.
    - spwa4 4mo ago
      If you mean that taking out any kind of debt is fundamentally a bet that whatever is being put up as collateral will grow faster than the interest rate? Because if it doesn't the risk that suddenly debt holders control you grows by a lot. Yes, absolutely. So, applied to GOOG, Alphabet Management is betting they will grow more than 4.5% per year at least until 2030. There is also some weirdness, like Alphabet making a 500 million USD bet short term USD interest rates will be lower than 4% over the 2025-2028 period.
      - mathattack 4mo ago
        Sort of. They can use the debt to grow, in which case they’re betting that they will get more profit than the principal plus interest payments. (Beating a 4% return on the loan, not the whole company) They could also use it to change the capital structure buying back shares. This simultaneously increases risk and share price, unless the reissue more shares. In both cases, if they can’t pay the interest payments, the company gets handed over to the creditors. Not an issue for Google, but a lot of startups struggle with venture debt.

Mistletoe 4mo ago

A good read when X is "borrowing like never before". https://pivotal.substack.com/p/minsky-moments-in-venture-capital https://pivotal.substack.com/p/minsky-moments-in-venture-cap...

smrtinsert 4mo ago

Is it me? I feel like we are entering an era where it has become possible for one of the big companies to fail.

fhdkweig 4mo ago
After the bailouts of 2008, I think the only thing to fear is that the US government will fail first. As long as they can afford to keep big businesses going, they will. Whether things will get bad enough that the government can't afford to do that is an exercise to the reader.
- deadbabe 4mo ago
  US Government won’t fail. They can certainly just default on all debt and keep on going like many other countries. It will be a shitty country going forward, but not a failed one. The best thing you can do is diversify assets to be prepared for that scenario, so you do not fall into the hell of a permanent underclass, in perpetual servitude.
  - dgellow 4mo ago
    The US defaulting would easily trigger the worst economic shock the world ever experienced. Other countries that defaulted weren’t the hegemonic power
- thewebguyd 4mo ago
  I mean, we are approaching the point where the government can't afford to do that. Debt is near $40 trillion, and debt held by the public has recently just slightly tipped over 100% of the US GDP, so we are long past affordability. Interest payments on US Debt are already $1T annually. If GDP stops growing faster than the interest rate on the debt, we're "cooked" as the kids say. If we lose reserve currency status, we are equally screwed. A big tech bailout isn't going to look like a big cash injection. It would look more like total asset seizure and nationalization of those companies.
  - 4mo ago

dmoy 4mo ago

$500B is a lot of debt, it's comparable to the three largest car companies' debt. It's still not super huge compared to the amount of debt in other industries, but I guess the thought is it's riskier?

vb-8448 4mo ago
Debt is directly tied with the ability to repay it, if the cash flow is enough to keep paying it, it's not a big issue, but thing can go horribly pretty fast if someone start having cash problems.
zer00eyz 4mo ago
500B on software would be a lot. On infrastructure, it really isnt. We spent this much (without adjusting for inflation), in 5-10 years on telecom build out in the lead up to the dot com crash. I'm fairly sure that there is still leftover capacity in the ground (dark fiber) today that we can leverage. Smell like a bubble yet? Looking back to that pre 2000's era, SUN was running on 50% margins, Cisco at 68% Nvidia, 70% (and MS openly admits that they have GPU's on shelves not making money: https://www.datacenterdynamics.com/en/news/microsoft-has-ai-gpus-sitting-in-inventory-because-it-lacks-the-power-necessary-to-install-them/ https://www.datacenterdynamics.com/en/news/microsoft-has-ai-... ) Micron (memory) 70%, SK Hynix (SSD's) 70%. For as much fun as the dot com bubble was, for as hard as the pop was, what came after was MUCH better. This burst is going to be brutal, and the sooner it happens the sooner we can move on to actual (sane) innovation, that leverages this build out.
- jayd16 4mo ago
  Certainly doesn't feel like the 90s bubble from main street USA. I'm not sure if that means a burst will be softer or much harder on the middle class.
- mikewarot 4mo ago
  >the sooner it happens the sooner we can move on to actual (sane) innovation, that leverages this build out. Unlike dark fiber which retained value, GPUs and compute hardware rapidly becomes obsolete. It won't make sense to use anything more than 4 years old, as performance and especially energy efficiency will have improved in that time. I wouldn't count on getting significant value out of the debris of the coming data center implosion. Copper thieves are likely the only ones who might, but there will likely be a glut and the risk likely won't be worth it for even them.

ElProlactin 4mo ago

The NVIDIA case is such a strange example to use to make the argument the author is trying to make. NVIDIA raised $25 billion and had $85 billion in orders. Because of the demand, it was able to upsize its offering and issue bonds in maturities ranging from 2 to 30 years at quite favorable interest rates. The amount raised is a quarter of a year's free cash flow and the spread tightened during the book building process, so bond investors obviously aren't on the same page as the author. You really can't make a bearish argument about the amounts being raised without putting the numbers in perspective. Yes, the issuances are big, but the equity and cashflows are also big, so the amounts being raised in the bond market don't really align to the author's skepticism when it comes to NVIDIA, Google, Meta. The author would have a stronger case with Oracle but that alone wouldn't support the "Big Tech" story line. Edit: $25 billion is a quarter's worth of free cash flow for NVIDIA, not half a year's as I originally stated.

krupan 4mo ago
What are you assuming the author case is? The article points out that by normal logic these companies are overvalued and so owning their stock is risky. Now that they've taken on all this debt, it's even riskier.
- ElProlactin 4mo ago
  The words "valuation" and "overvalued" appear exactly 0 times in the post. The author didn't make the argument you're claiming. Actually I misspoke in my original comment. NVIDIA has about $100 billion/year of free cash flow. So $25 billion is a quarter's free cash flow, not a half a year's. $25 billion of debt against a $5+ trillion equity value and ~$100 billion of annual free cash flow barely moves the needle on equity beta or default risk.
  - krupan 4mo ago
    [dead]

0xcafefood 4mo ago

https://www.inc.com/fast-company-2/oracle-ai-boom-hidden-debt-nvidia-jensen-huang/91357055 https://www.inc.com/fast-company-2/oracle-ai-boom-hidden-deb... goes into more detail about this same issue.

krupan 4mo ago

And now SpaceX, who is not at all in the same financial situation as Nvidia, wants to borrow money too: https://www.reuters.com/business/media-telecom/spacex-bankers-prepare-bond-sale-least-20-billion-bloomberg-news-reports-2026-06-18/ https://www.reuters.com/business/media-telecom/spacex-banker...

RetroTechie 4mo ago
Ofcourse xAI brought under SpaceX's umbrella has nothing to do with that.