“Market is overreacting to hyperscale credit spreads widening from my perspective. TL;DR Spot pricing for renting GPU compute materially above contracted rates implies hyperscalers are underearning while operating cash flow acceleration is an underestimated source of funds for AI https://t.co/D9FSHXQ8F8”
“Market is overreacting to hyperscale credit spreads widening from my perspective. TL;DR Spot pricing for renting GPU compute materially above contracted rates implies hyperscalers are underearning while operating cash flow acceleration is an underestimated source of funds for AI https://t.co/D9FSHXQ8F8”
Baker acknowledges real yields rising and spreads widening but argues less credit needed given operating cash flow acceleration
“@dampedspring Of course. Real yields going up and spreads widening is undeniable. I am saying we may need less credit than expected given a likely continued acceleration in operating cash flow.”
Baker acknowledges real yields rising and spreads widening but argues less credit needed given operating cash flow acceleration
“@dampedspring Of course. Real yields going up and spreads widening is undeniable. I am saying we may need less credit than expected given a likely continued acceleration in operating cash flow.”
Baker acknowledges rising real yields and widening credit spreads but argues companies may need less financing because operating cash flow is accelerating.
“@dampedspring Of course. Real yields going up and spreads widening is undeniable. I am saying we may need less credit than expected given a likely continued acceleration in operating cash flow.”
Baker acknowledges rising real yields and widening credit spreads but argues companies may need less financing because operating cash flow is accelerating.
“@dampedspring Of course. Real yields going up and spreads widening is undeniable. I am saying we may need less credit than expected given a likely continued acceleration in operating cash flow.”
Baker argues contracted compute trades at massive discount to spot, repricing will drive acceleration despite potential spot price declines.
“you have the contracted base of installed compute trading at a massive discount to the current spot market, and as those contracts roll off and compute gets repriced higher, spot could decline and compute will still get repriced higher,”
Baker reports hyperscaler operating cash flow accelerated from $28B to $32B despite unusual legal expenses.
“Operating cash flow from Microsoft, Meta, and Amazon has reported accelerated from '28 to '32. There are some actually pretty big unusual items now like these hyperscalers.”
Baker says adjusting for one-time items shows hyperscaler operating cash flow accelerated from $28B to $35B.
“But there is an unusual amount of onetimers this quarter. And if you adjust for that, we went from 28 to 35. That's that's a material acceleration at this scale.”