Cade Metz

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.

Well, some of the debt is taken on in the way you might think.

These companies go to a bank and they borrow the money.

And you know exactly who lent it, who borrowed it, how much it is.

But increasingly, we're seeing other deals where it's hard to see where the debt is and how much of it there is.

A lot of the money is being lent by what are called private credit institutions.

Legally, you can't see inside these companies.

The other thing that's happening is you're seeing the rise of these securities.

They call them asset-backed securities, something that came up during the housing bubble that people may be familiar with.