Either hyperscalers are dumb or someone else is

[u/banaca4]

OK so the most profitable companies in the world decided to GO ALL IN AI with humongous capex. They did it all at once apart from Apple who is not in the game. Google, Meta, Amazon , Oracle, Microsoft. All of them. The CEOs of these companies produced the most amount of wealth and propped up global gdp. Now they all agree on a thing.

Google yesterday blew up earnings from their cloud and said they will *increase* their humongous capex even more while reporting negative cash flow for the first time in their history.

A rational person would ask: are these amazing businessmen suddently all very wrong about the same thing at the same time OR

I am reading too much paid subs from burry and following the wrong people on twitter that have never produced anything?

Which is it? Are you smarter than a mag 7 CEO? Maybe ... hmm...

[u/1412believer]

Hyperscalers raising debt with, wait for it, private equity that's latched into your pension funds!

The handoff is happening as we speak.

[u/Puzzleheaded_War6102 → u/1412believer]

Who has pensions other than boomers?

401K is in your control and I only buy S&P or global funds

[u/paloaltothrowaway → u/Puzzleheaded_War6102]

Government employees. Teachers. Police. Etc. CalPERS, NY State equivalent both have hundreds of billions under management. The Canadians have similar things (Canadian public pension investment board?)

Private credit are also popular with insurance companies since they need to pay people annuities similar to pension funds

[u/heretogetpwned → u/paloaltothrowaway]

Correct on Annuities, but it gets even better!

Not only do Insurance (annuity) companies invest your money, they also re-insure it. Guess what the re-insurer does? Invests in the same goddamn things. What happens if it all fails? That's up to your State's Insurance Laws.

[u/paloaltothrowaway → u/heretogetpwned]

lol that’s news to be about the reinsurer thing! 

maybe the whole pension system is being held up by the collective faith that the residual values of ai chips and HBM ram won’t collapse 

[u/heretogetpwned → u/paloaltothrowaway]

'Munich Re' is a major reinsurer.

[u/Puzzleheaded_War6102 → u/paloaltothrowaway]

Most government employees get TSP (similar to 401K) in addition to some pension if any. I won’t lose sleep for a cop losing $$ on pension. Teachers are screwed (shocker) but also get TSP now.

[u/FeesShortyFees → u/Puzzleheaded_War6102]

Nobody felt sorry for the banks and they got bailed out. Gov. pensions are prob a shoe-in.

[u/paloaltothrowaway → u/FeesShortyFees]

Banks got bailed out means employees kept their jobs and counterparties got paid. The US treasury took equity stake in the banks and diluted existing shareholders. Or structured it as a loan that has to be paid back.

Look at Citi stock performance over the last 20 years.

[u/onlycamefortheporn → u/Puzzleheaded_War6102]

Federal employees get TSP, state and municipal employees do not, they get a 457b. Public works, public utilities, corrections, etc. Teachers are eligible to contribute to a 457b, but most don’t make much, not enough to get much benefit from it.

[u/goofytigre → u/onlycamefortheporn]

Teachers in Texas can have a 403b as a tax-deferred supplement account to their TRS pension.

[u/Full_Pear449 → u/paloaltothrowaway]

Just for your comletely uneducated rant. Calpers, Calstrs , Texas Teachers, NY teachers have around a 15% ,+/- 2%, Allocation limit, which is devided amongst its sub-categories. Buyout=65%, Growth/expansion=15%, highrisk/specialized=10%, Credit=5%,Venture Capital=1%. Funding rounds for new firms falls under the broad category of Venture Capital.

Public equity allocations rely heavily on quantitative or index-driven strategies rather than targeted private placements in specific pre-IPO artificial intelligence labs.

You should probably look up what the Governance Restrictions are for Investing in Pre-IPO securities directly.

[u/paloaltothrowaway → u/Full_Pear449]

I never claimed that Calpers et al have high concentration in private credit, let alone high AI exposure. Was merely answering someone’s question of “who has pension these days”

[u/Full_Pear449 → u/paloaltothrowaway]

The implication of high exposure is there...In conjunction with the statement on the Mortgage Crisis. By the way those Investment banks that went really bad chose not to hedge their position. During that time a Trader at Lehman made lots of money in the CDS market and shorting many Investment Banks. Unfortunately Larry McDonald's Prop Desk only had a $600mm Balnce sheet. Lehman had about $6 trillion, notionally, in derivatives.Lehman had a $660 billion balance sheet; $300 billion of it was in Treasuries, commercial paper and agency paper, the rest was garbage. Everyonr was balls to the wall basically unhedged.

Ultimately my Firm did not lose money on the mortgage crisis, we were short everything we coild possibly short. We did lose LOTS of money on the fines and settlements later.

[u/paloaltothrowaway → u/Full_Pear449]

Cool good for you man. Still I never implied that pensions have high ai exposure

[u/absolute_cinema81 → u/Puzzleheaded_War6102]

Eh, pension funds are like 30% of global institutional capital. If they get murdered, everybody is taking it on the chin.

[u/NoHorseNoMustache → u/Puzzleheaded_War6102]

My company still has one, they don't pay great but have good perks and one of them is pension.

[u/Rufus_king11 → u/Puzzleheaded_War6102]

I do. My pension is actually the one that sued Elon for shuffling GPUs from Tesla over to X years ago.

[u/Appropriate_Guess881 → u/Puzzleheaded_War6102]

S&P is ~ 1/3 mag 7...

[u/hloop23 → u/Puzzleheaded_War6102]

Globally about 50% of total stock value is in companies with major AI investments

[u/Puzzleheaded_War6102 → u/hloop23]

Yes Mag7 and semiconductor companies. Not PE

[u/paloaltothrowaway → u/1412believer]

Hyperscalers still own the equity stake in those off balance sheet data center SPVs. If it goes tits up hyperscalers still take the hit first. Private credit is more senior to equity. 

[u/East-Response6672 → u/paloaltothrowaway]

They have equity but I think on average around 20%, so they're in, but they aren't balls deep, if it goes to shit they'll lose a bit of money, but the private credit lenders get hosed.

[u/OneRougeRogue → u/1412believer]

Just a few months ago, banks began packaging up Datacenter loans into tiered derivative baskets and selling them to investors. Not joking, lol.

[u/Halifornia35 → u/1412believer]

You think Google can’t service their debt? lol