“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 reports AI stocks down 40-60% in a month despite no negative quantitative metrics or deceleration.
“Loads of AI names are down 60% from their highs. We'll call it 40% to 60% in a month in a straight line.”
Baker observes that contracted compute capacity is trading at a large discount compared to current spot market prices.
“Essentially, you have the contracted base of installed compute trading at a massive discount to the current spot market,”