Three things I've been thinking about:
1. S&P on Data Centers
Among the scariest six-word sentences in English is: Ratings agencies think it is fine. In a new report, S&P is fine with the following:
- Capital is flooding into data centers on the back of AI demand
- More than half of planned spending is debt-financed
- All of this is pushing valuations, leverage, and deal sizes to record levels
- Power, land, and water are being stretched to the limit, and speculated on madly.
- Data center leasing prices and occupancy spiked a year ago, and are now weakening
And yet, here is S&P's conclusion: fundamentals are “healthy”. I am reminded of Inigo Montoya in The Princess Bride: You keep using that word. I do not think it means what you think it means.
2. Howard Marks on AI and Jobs
Oaktree's Howard Marks concludes his latest investment memo—broadly about AI's bubble-ishness with candid and personal comments on what a post-AI future looks like for jobs. And he thinks, he says, it looks "terrifying".
His main points: