00:00Professor, we were just looking at a chart of CDS spreads widening on some of these hyperscalers
00:07that you were just talking about. It does seem like some of these cracks are starting to show
00:11up in the credit market. How do you think about that and what it tells us about where we are
00:16in
00:16the AI investment cycle? I don't think any of these companies have a credit problem, but there
00:22are other companies in the AI architecture space, smaller companies that have used a lot more debt
00:26to fund data centers that I think are in trouble. And I think if they go down, they're going to
00:31take
00:31a segment of the private credit market down, and that's dangerous because it can drag the rest of
00:36us down. So I know the spreads are widening, but if you look at the size of those spreads, 93
00:42basis
00:42points is still very much in the AA, A-plus range. These are not companies where you're worried about
00:48getting repaid. You're a little more worried than you used to be five years ago, but that's not danger
00:53territory. But there are other companies where I think it is danger territory.
00:57Like what?
00:59Like the small, I mean, CoreWeave, I mean, you can take the smaller companies in the
01:03AI architecture space, the smaller providers, the smaller companies space, taken as an example,
01:10CoreWeave, and you look at a company like that, there the debt can be a real issue because you don't
01:14have a cash cow feeding into the paying off of debt. Whereas every one of these companies, if they stop
01:20their AI investment tomorrow, would be able to use the cash flows from their advertising
01:26business and the social media businesses to cover the cost of the debt that they took on
01:32to fund the AI architecture.
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