Cade Metz

People generally agree that this is not what we're going through at the moment.

Let's not go that far.

That said, they do point out that there are elements that we're seeing now that were also present then.

Basically, this is about the enormous amount of debt that is being taken on to build these data centers, the enormous amount of money that's being borrowed to build them.

And as you look at that debt, it's hard to know how much there is and who is holding the debt.

If that debt is spread across a lot of companies, then you have more systemic risk.

You have greater risk that could damage the rest of the economy.

Well, some companies are not taking on debt to do this.

Some companies like Google and Microsoft and Meta pull in billions of dollars in revenue every year.

They can afford to essentially pay cash for these giant data centers.

But there's so much interest in AI.

There's so much demand for the computing power that comes out of these data centers that we're seeing all sorts of other companies build these giant facilities when they don't have the money to do it.

Even relatively big companies like Oracle, the cloud computing giant, is having to take on debt to build data centers.

And then you have all these smaller companies that most people on Earth have never heard of with names like CoreWeave, Lambda, and Nebius.

They are certainly taking on debt to do this.

Corweave, a company based in the New York, New Jersey area, has told financial analysts that for every $5 billion in data center infrastructure they build, they have to take on almost $3 billion in debt.

In the end...

They think that they will pull in the revenues needed to pay back those debts.

But ultimately, if the AI technology does not pull in the money, then you can't repay those debts.

And that's when you have a problem.