Arjun Gupta

think about what you hear in early stage funding (for equity capital). Venture won't even listen to you unless you say AI. That is now pushing downstream into the public equity markets (which people will claim is just equity investors losing their heads per usual) but also into the debt markets, as chips and datacenters use debt financing to build out the infrastructure. Given the degree to which the market is compute starved the datacenter builders will still happily build at higher cost of financing (since their projects pencil so well), and the durability of the nvidia chip values means that so long as they're building nvidia they can collataralize debt against the chips, lowering cost of finance for even more balance-sheet tenuous operators. I would expect that you will see this cut against high yield at first. After all the debt finance has to come from somewhere, but high yield financing generally sloshes around to where the marginal opportunity lies (and high yield investors are expecting some of their credits spin sideways on roll risk and general business idiosyncrasies.) That compute will be presented and financed as a more stable more investment-grade-y asset class and so begin competing for funding against corporations and entities that aren't used to such a fierce level of competition is the surprising bit that I expect people aren't really dimensioning or anticipating. As the annual capital requirements for datacenter build outs scales into the trillions, that becomes meaningful relative to the size of total global corporate issuance. If AI infrastructure builders can tolerate a higher cost of funding because their projects underwrite better, where does that leave the incumbent stable businesses expecting to roll their credit at a more normal spread. Of course the base rate matters as well, if real GDP growth inflects as we anticipate (and you can already see the leading indicators that this is going to occur) that should naturally drive long rates higher (even as technological deflation keeps inflation in check.) Cross the two and very stable businesses that seemed to be chugging along fine could suddenly find themselves starved for inexpensive capital to a degree sufficient to destabilize their operating models. Be very wary of businesses that claim they can live outside of disruption; we are at a pivot point, and the world is turning.

a surprise I think is coming the quick payback periods and extraordinarily high IRR for AI infrastructure, even at monumental scale, will push up cost of capital sufficient to push many traditional businesses into the abyss, even those without obvious direct AI counter-exposure