@refugeepat.bsky.social

@refugeepat.bsky.social

Trapped in Occupied America If you’re not furious you’re not paying attention! Using 🤬 way too much these days Love science, animals, good food, travel and the outdoors. Yoga practitioner, former satellite engineer, teacher’s assistant, marathoner. 🟦

@kylec.bsky.socialReposted by @refugeepat.bsky.social

It's debate night on 9NEWS. GOP Rep Lauren Boebert and Democrat Eileen Laubacher in their only scheduled debate. 6-7PM on 9NEWS and streaming everywhere you find 9NEWS.

@kalimurray.bsky.socialReposted by @refugeepat.bsky.social

And I believe that the ways in which racialized Speech and Debate—in particular with Representative LaMonica McIver—is part of a denial that a diverse Congress is not to be accorded the same protections even though they represent a multi-racial democracy.

@edzitron.com PinnedReposted by @refugeepat.bsky.social

Premium Newsletter: The Hater's Guide To Junk, the world of high-yield debt where Anthropic and OpenAI will have to play if they want to survive post-IPO - and why the same leveraged loans that killed multiple software companies may be their only option.
www.wheresyoured.at/premium-the-...

wheresyoured.athttps://www.wheresyoured.at/premium-the-haters-guide-to-junk/Ladies and gentlemen, we are in a glorious, splendiferous, outrageous era of crap! Some call it “high-yield,” some call it “speculative-grade,” but to those of us living in the real world, we know…
@edzitron.comReposted by @refugeepat.bsky.social

This story has no happy ending. No last-minute rescue. This is nothing like the Dot-Com Bubble, Anthropic's losses and IPO are nothing like Amazon or Uber. 80% of Anthropic and OpenAI's revenues come from AI startups. It's all unsustainable.
www.wheresyoured.at/credit-crunch/

While a few people have danced with the edges of the potential insolvency of OpenAI and Anthropic, nobody seems to want to talk about the actual consequences, choosing always to take one shot of hopium before getting into the grisly details, with the assumption being that something will go alright — so I’m going to rain on everyone’s parade and go through each point one by one. NVIDIA Will Still Have Customers After The AI Bubble! Sure it will — for its gaming segment that is now so small that it’s blended into “Edge computing” on its earnings. As I’ve discussed previously, 50% to 60% of NVIDIA’s revenues are coming from hyperscalers that are actively participating in the AI boom, and without that boom (and the debt necessary to keep buying chips), nobody else is buying them at anything close to today’s scale. If Anthropic and OpenAI die, all that data center compute will be used by someone else one day! OpenAI and Anthropic represent 80%+ of all compute demand, and their customers — unprofitable venture-backed AI startups — make up 80% of their enterprise revenues, which means they’re likely to die before OpenAI and Anthropic. Someone else will pay for the capacity if they don’t! Who? Who is actually spending money on AI compute? I’ve looked everywhere and I’ve found at the very, very best $22 billion of non-OpenAI/Anthropic compute purchases! All of this capacity will be useful after the bubble bursts! No it won’t! Any AI data center that’s yet to be completed will cost just as much (if not more so) to finish in a few years as it will today, much like the electricity costs are going to be. In addition, the vast majority of customers for AI compute are unprofitable AI startups that want to compete with OpenAI and Anthropic, meaning that once the venture spigot turns off, nobody will want it. AI services are like airlines — you stand up inference based on the amount of customers you might have, and need to guess correctly about your demand, because if you’re off in either direction, you lose a ton of money. With most of the demand for AI driven by endless media and peer pressure, once the AI bubble bursts, the “demand” for AI services will be entirely driven by utility…and considering most services lose money even during the hype cycle, it’s hard to see what post-bubble economy even exists. This means that it’s unlikely that we’ll have a “booming open source AI market” in the end, and at best we’ll have some sort of handicapped Google monstrosity, though even that seems less likely based on the fallout I fear. Anthropic and OpenAI can just cut their costs! With hundreds of billions of dollars in non-cancellable commitments, neither of these companies can “cut their costs.” OpenAI and Anthropic are the fastest growing companies of all time! Based on annualized run rates that are pegged to non-specific periods of time, all as their costs explode and they sign non-cancelable agreements. If Anthropic and OpenAI die, there will be other winners! Who? There are no other AI companies that are growing anywhere near as fast or have customer bases that come close to Anthropic and OpenAI, and those customers are mostly other AI startups. If Anthropic and OpenAI die, it’s because their customers died, which means their customers won’t be the “winners.”
@edzitron.comReposted by @refugeepat.bsky.social

Debt markets aren't sentimental. They care about real numbers - true EBITDA - not ARR or fancy metrics designed to show profitability by excluding all the bad stuff. OpenAI and Anthropic will find them harder to fool than investors and reporters.

www.wheresyoured.at/credit-crunch/

Yet things get a little messier when you factor in non-cancelable contracts, which total $413 billion in Anthropic’s case across the next seven to ten years, guaranteeing financial strain at a time when future cashflows are far from guaranteed. Take-or-pay agreements — the subprime mortgages of the AI bubble — are considered debt equivalents in the eyes of creditors, which would in turn drag on cashflows. You see, you can jingle the keys of "annualized run rates” and “adjusted operating income” in the faces of venture capitalists and journalists as much as you want, but investors require actual cashflows, even within a frothy market. Anthropic’s vulgar “Earnings Before Training, Interest and Taxes” measurement does not matter when the entire calculation is made on cashflows, and any attempts to act otherwise are either ignorant or deceptive. EBITDA, of course, refers to Earnings Before Interest, Depreciation and Amortization, which means that all “above the line” costs — such as inference costs, training costs, SG&A and leases — are counted, but the cost of depreciating assets like GPUs (of which Anthropic and OpenAI have none) and interest is left off. Let me give you a very straightforward example from my own story on OpenAI’s audited 2025 financials, when it had $34 billion of expenses and $13.07 billion in losses, for an EBITDA of $20.92 billion, or an EBITDA margin of negative 160%.
@edzitron.comReposted by @refugeepat.bsky.social

To be clear, this isn't something affecting just those exposed to the AI bubble. All corporate debt is influenced by the cost of ten-year treasuries, the cost of which has soared recently, making junk-heavy data center debt much more expensive to raise.
www.wheresyoured.at/credit-crunch/

Ten-year treasuries are considered the “benchmark” rate, because it’s the most actively-traded and liquid security in the world, and while mortgages in the US tend to be structured as thirty-year-long loans, most people tend to either sell or refinance their houses in the first ten years of the loan. It also represents, to paraphrase a friend in fixed-income, a period of time that’s both a long way away but not so long as to be impossible to comprehend. You’ll also notice that the “pricing” of treasuries (and bonds in general) is usually expressed in percentages rather than prices. That’s because the price of a bond doesn’t tell you how much it’ll pay you, how many payments there are left to go, or what its value is relative to other bonds. As a result, the pricing page for ten-year-dated US Treasury notes shows an interest rate — 5.33%, for example — that represents “how much money would I get on an annual basis if I invested in ten-year Treasuries today?” based on the soup of different notes in the market based on their various maturities and interest rates. The ten-year is considered the barometer of investor sentiment — how much the market feels comfortable lending to the US government, based on everything they do and do not know, which is why it shifts so often with economic data and the price of oil.Right now, ten-years are “selling off,” meaning that the effective interest rate on them is going up, based on a few different factors: The US government has over $40 trillion in debt, and to pay off that debt, the US government issues more debt, with interest payments making up 14% of all federal spending, and the federal deficit (IE: how much more the government spends than it pulls in in revenue) sitting around $2 trillion a year, meaning that, at minimum, it’ll need to borrow an additional $2 trillion in 2027 beyond what it borrowed in 2026 just to pay what Congress has authorized in spending, and the same amount again in 2028 if the deficit stays the same next year. This means that anyone pricing US Treasuries is doing so under the virtual guarantee that the US government will have to issue more debt. The alternative is that the US government cuts social security, medicaid or military spending, which would be very unpopular, and thus very unlikely to happen. The wars in Iran and Ukraine are putting increasing pressure on the world’s oil supplies, because higher fuel costs push up inflation because they increase the cost of effectively everything — both driving and flying to places, which is how most people and goods move around the world, as well as the cost of electricity (particularly where natural gas is concerned). As I wrote a couple of weeks back, the war in Iran has also cut the supply of other raw materials, including sulfur (which is used in fertilizers), helium, and aluminium, further exacerbating the inflation crisis. With the price of everything (at least in theory) inflating, investors demand that their bonds pay them at a rate that matches the rate of inflation. There’s an ongoing debate — discussed here by the Financial Times — about whether US data center debt issuance has reached a point when it’s creating meaningful competition for US government debt, specifically that issued by Google, Meta, and Amazon, because these “stable” companies arThat last part is very, very important. While stocks can recover based on good news (even if said good news is entirely fictional), the price of ten-year-dated treasuries is reacting to so many different economic indicators that even the things that should calm it down — like lower-than-expected jobs numbers — aren’t stopping them from dumping. And so when the ten-years dump, the base interest rate of almost everything increases, and some of the things that are becoming more expensive as a result are actively contributing to the problem. The US Government cannot afford to stop issuing debt, the wars in Iran and Ukraine aren’t going anywhere, and hyperscalers expect to issue $400 billion in bonds in 2027 alone. As a result, everything gets more expensive for everyone, and the worse your credit is, the worse this gets. So, now that we know all that, we can speak to the larger problem. When somebody borrows money, they do so priced at a “spread” above the equivalent-dated US Treasuries — usually judged based on the underlying economic health of the company, the general vibe about the kind of thing they’re borrowing for, and the current ‘price’ (read: effective yield) of their debt, usually measured based on its “spread” from today’s US Treasury prices. This means your borrowing prices can go up based on a few factors: The price of equivalent US treasuries at the time you are issuing the debt. The current price of the company’s debt.
@edzitron.comReposted by @refugeepat.bsky.social

Free newsletter: Outside of major hyperscaler backstops, I estimate that Anthropic and OpenAI would get a speculative B or CCC credit rating, which would be insufficient for the $50bn-$100bn a year they need, in an era of historically high interest rates.
www.wheresyoured.at/credit-crunch/

wheresyoured.athttps://www.wheresyoured.at/credit-crunch/If you liked this piece, you should subscribe to my premium newsletter, and you can subscribe on the following links: $70 a year, $18 a quarter, or $7 a month. In return you get a weekly premium…
Older posts