Derek Thompson

The economic commentator Noah Smith wrote a piece about what it would look like if a data center slowdown became a true financial crisis.

And he put it this way, and I would just love to hear you evaluate this particular logic.

He said, you know, number one, we've got this big story about how this time is different, that AI is going to be the technology to overtake all technologies.

Number two, we've got a large and increasing amount of debt.

being used to fund one single sector.

And that means that the loan's probability of default is highly correlated.

If one loan defaults, it means there's probably others that are gonna default as well.

We've got an opaque corner, as you've said, of the financial system with private credit that's grown a lot.

And finally, we have systemically important lenders, banks, and even insurance companies.

I believe life insurance companies in particular are significant LPs to some of these private credit firms you've talked about.

And they're enmeshed in this new sector that might see a drawback in the near future.

To what extent do you think that this represents the ingredients for an actual financial crisis?

what's the most likely way that you're wrong or that we're wrong?

That like the case for the bubble has some error in it, right?

Like I could imagine like if, maybe if like Michael Semblist was on this call, he'd say, look, these companies have more free cashflow than any group of companies in the history of modern capitalism.

They can withstand enormous, enormous amounts of infrastructure spending for years and years, and they'll still be highly profitable because they're fundamental business models, whether it's ad sales or whatever collection of businesses you could say Microsoft is in.

They can withstand an enormous hit to their balance sheet.

They are withstanding it right now.

That's number one.

And number two, maybe this technology is closer to