Today’s Market = 1999 Capex + 2008 Credit – Ep 298

Anthropic’s revenue has grown nearly 10x a year, three years running. Its losses are accelerating with it. And here is Dario Amodei in February: “If my revenue is not 1 trillion dollars, if it’s even $800 billion, there’s no force on earth, there’s no hedge on earth that could stop me from going bankrupt if I buy that much compute.”

The AI rollout has felt like déjà vu of the 1999 telecom bubble. It is starting to feel like that bubble is being supersized into something closer to what led to the 2008 financial crisis. Trillions in data centers, financed through the same opaque vehicles that broke the last cycle.

I walk through the two dynamics stacked on top of each other. The 1999 side: OpenAI, Anthropic, Google, Microsoft, Meta, Amazon, xAI, and Oracle racing to build capacity, while Nvidia and Micron earn software-like margins on GPUs and memory. Customers that once generated enormous free cash flow are now issuing debt and equity for the first time in decades. Open-source and Chinese models are already delivering good-enough results at a fraction of the cost.

The 2008 side: special purpose vehicles, vendor financing (Nvidia reportedly guaranteeing roughly $250 billion in lease and debt financing for an OpenAI campus in Ohio), and a Pranjal Drall and Andrew Granato paper on private credit sitting inside life insurers bought by private equity, with about 86% of any failure quietly landing on taxpayers.

I also share how we are positioning: smaller positions, AI losers, software, Europe and Latin America, less financials, more cash.

The full piece is at investor.fm.

_________________________________________________________ 🔗 LINKS MENTIONED: Private Credit’s State Backstop Paper https://papers.ssrn.com/sol3/papers.cfm?abstract_id=7152239

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_________________________________________________________ WHO AM I: Vitaliy Katsenelson is the CEO of Investment Management Associates (IMA) and an award-winning writer. Forbes Magazine called him “The New Benjamin Graham.” His work has appeared in the Financial Times, The Wall Street Journal, Barron’s, Fortune, Institutional Investor, and Foreign Policy. He is the author of three books, including Soul in the Game: The Art of a Meaningful Life. _________________________________________________________ Please read the following important disclosure: https://investor.fm/disclosure/

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