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Many people who work closely on AI and are constantly seeing charts like the one on the left (AI capability growth) think that it will translate to the graph on the right (GDP growth). But the economy is much more complicated than that.
Source: Alex Imas (X), Director of AGI Economics, Google DeepMind
Oracle has been building data centers at an incredible rate, funded by debt.
That debt is now trading BELOW face value, meaning the market is pricing it for less than what it was originally issued for. And the cost of insuring Oracle’s debt against default is at its HIGHEST level since 2009.
But that's not all...
Oracle raised a $38 BILLION construction loan for data centers in Texas and Wisconsin. Six months later, about $1 BILLION of that debt was still unsold. So the original lenders are now selling parts of it at a DISCOUNT... Taking a loss just to get out.
And it’s not just them.
JP Morgan and Morgan Stanley are also moving AI-related loans OFF their balance sheets... Because both are approaching the limits of how much AI financing they’re willing to hold.
WSJ: The war in Iran has exacted a big toll on the average American pocketbook, costing "the average American household more than $2,000."
Source: Brad Wilcox (X)
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Gnosly Live Signals | AI is getting cheaper
At a given level of performance, cost has fallen ~47%/quarter since 2023.
Gnosly Live Signals - China is seeing a historic boom in exports due to AI.
China outsmarts the world - Source The Kobeissi Letter