The economic vampires must salivate about this opportunity all night and day.
It's mostly known, but you're probably right it's not exactly known
45 trillion across all retirement accounts, 12 trillion in defined contribution (including 401k), 9 trillion in just 401k
https://www.ici.org/statistical-report/ret_25_q2
In that chart, the 18T of IRA has portion in private equity, and the 15T of pension (defined benefit) has a portion in private equity. The 13T defined contribution plans (of which the vast majority is 401k) can't be placed in private equity right now.
"Pacific Investment Management Co. (PIMCO) is the anchor lender on the deal. The debt, which matures in 2049, is fully amortising and has been rated A+ by S&P. The bonds were priced at around 225 basis points over U.S. Treasuries."
https://pe-insights.com/blue-owl-and-meta-close-record-30bn-...
Oof.. I don't know about this one.
Does this mean that this investment spreads the bubble burst risk into people's pension funds? (those lucky enough to have such a thing) Or, not necessarily?
They are required to pick based on some defined formula which the various stakeholders signed off on, and hence are prime juicy targets for people trying to game systems.
They also took the ‘08 mortgage crisis right in the shorts, for the same reasons.
Knowing when it will burst is.
I assume eventually all this investment should result in price drops for cloud GPU rates. Maybe somebody has setup an automated rate aggregator and collected the data? It would be interesting to see the historical data and monitor the changes, like dollars per TFLOP/hr or something standardized to track over time like other economic data or prices. EDIT: this is along the lines and pretty interesting — https://www.unitedcompute.ai/gpu-price-tracker
I know I’m mixing two different thoughts but they are connected in my head for entrepreneurs interested in starting independent tech/AI/LLM businesses needing heavy compute infrastructure.
Old GPUs (ex hopper, A100) prices has been dropping but the new ones will go up.. so yes it doesn’t need to crash for you to have cheaper gpus
But tech companies horde cash because they don't have anywhere they see as a good investment.
You'd think investing in their own data centers would get a better return than cash.
Kind of makes you wonder why everyone is so eager to fund these projects for them.
Kudos for being very succinct. I believe the youths would have just replied: "this." :~>
Practically speaking, they also need to build data centers, and real estate has more pedestrian (returns and) valuations, even when it houses fantastical uber tech.
Is Meta so unsure about this investment, that they decided to spread the risk and profit to other parties, even though they could fund it themselves?
(AI bubble death knell ?)
You'll be paying a higher rate of interest on your loan than you're receiving on your cash.
You'd be better off taking the $1m directly out of your cash pile.
When you borrow $1M against $100M in cash or assets its generally considered a very low risk loan, meaning you'll likely get good terms and comparatively low rates.
In terms of corporate capital structure, shareholder returns are usually maximized by taking on at least some debt (leverage). The precise optimal proportion of debt depends on several factors, particularly credit rating.
Maybe we'll be blessed by AI companies making money but staying under usage projections. Then, those areas have more power.
> Blue Owl Capital Inc. and Meta will split ownership of the Hyperion data center site in Richland Parish, Louisiana, with the tech giant retaining just 20% of it, according to people with knowledge of the matter. To finance the build-out, Morgan Stanley arranged over $27 billion of debt and about $2.5 billion of equity into a special purpose vehicle
At 225 over (current?) treasuries:
> The bonds priced at about 225 basis points over Treasuries,
Louisiana residents better expect higher energy costs soon as well that’s for sure. No way entergy is content eating the costs of these investments and the state basically has an allergy to taxing or in any way financially inconveniencing companies.
The way things typically go in LA the only guarantee is the residents will be on the losing end in some form or fashion (also many politicians are probably skimming off plenty for themselves and their buddies). Especially with Landry at the helm.
(Meta? Blue Owl Capital's institutional investors? Blue Owl Capital's private investors?)
master_crab•7h ago
Or maybe they’re ok with the collateral on offer.
sottol•7h ago
mlnj•7h ago
The latest from AI is better targeted ads and better adult content didn't you hear?
temp0826•6h ago
erichocean•6h ago
mlnj•5h ago
Mountain_Skies•7h ago
Fade_Dance•6h ago
If Blue Owl is providing capital for an equity slice, they get huge leverage on their cut baked into the deal. Pension funds that may end up buying debt in the deal eventually don't want to actually fund the equity of the project and take the risk booting it all up while sitting at the front of the capital stack with corresponding risk of getting wiped out (even if it's a Meta partnership), they simply want securitized fixed income, and make it as vanilla as possible.
So the question is more "will Private Credit (or pension funds/institutions) take debt backed by datacenter collateral with long term service agreements with Meta" and the answer is yes. There is much lower quality stuff than that in the PC space.
master_crab•4h ago
But the one thing that doesn’t compute is the commitment. There is a long term obligation now incurred by meta to use this infrastructure. If it’s a capital lease I assume this is now a liability on their books (and disclosures)?
Fade_Dance•6m ago
Maybe they don't want to securitize their core assets and introduce a new favored class of investor. Ex: If they are securitizing their AI data centers as part of the initial capital raise, those investors would be higher up the capital stack. They would get the datacenter in a theoretical bankruptcy before the bond/equity holders got their cut of the liquidation. Intel securitized their new fab builds with Brookfield and Apollo and, as a shareholder at the time, it didn't feel great. No idea what the precedent is regarding Meta by the way, just a thought.
Maybe they think that the lenders are a bit "overzealous", and they want to push the risk of things like write down on GPU racks entirely onto external parties who are apparently all too happy to take the risk.
I'm guessing it's a mix of both, combined with the fact that we're seeing some copy and paste thinking. This is proving to be a way to get fast access to the huge private credit market. I would assume there must be some very wide deal flow pipes cranking currently, so why not tap into them if the demand is there in the other end.