00:00Alphabet, the latest company looking to raise debt to fuel AI spending,
00:03it's looking to raise $3.6 billion specifically in what would be the biggest ever sale,
00:08or its first ever sale rather, in Australia. Joining us now is Bloomberg Intelligence Tech
00:12credit analyst Robert Schiffman. Robert, can we first, before we get to the kangaroo bonds,
00:17pick up on that point that Ed left off on, of the ability to get funding in this bond market
00:22and
00:23the off-balance sheet borrowing that's happening. How much of that speaks to something that's not
00:29circular financing concerns? That's happening among the private credit players, that there's
00:33enough sort of in this ecosystem that it's not concentrated. Sure. You know, Ed is talking about
00:38points of validation for AI. And all we keep seeing, I think, are bullish data points of explicit
00:45success. How AI is starting to be monetized and monetized in size. Yet all we want to talk about
00:51in general is about how bad things are, how it's a house of cards, circular financing, how this is a
00:57set up for collapse. And I believe it's absolutely the opposite. The way that these hyperscaler CEOs are
01:03talking about demand exceeding supply, we continue to see that in the bond markets. It's in all
01:09different forms, whether it's public, private, on-balance sheet, off-balance sheet. The real question is
01:15simply, is there enough capital around the globe to build what these CEOs see as their vision? And my answer
01:23is yes. And the bond markets are proving that in size. It's there's enough capital in the world. But
01:28how much of it is, again, is needs to be coming from different sources than just public bond markets,
01:33just given the insatiable appetite of these hyperscalers and how much they want to spend?
01:37Well, we're seeing it from a wide variety of sources right now. Just in the unsecured markets alone,
01:42if you look at what Alphabet has done, they've borrowed a little over 75 billion of bonds. But that comes
01:47from
01:47the US. It comes from Swiss francs, sea dollars, euros, British pounds, and now these Aussie kangaroo
01:54bonds. I just think there's a lot of money chasing after the potential growth that we see. And the real
02:02question again is, are you going to see that growth? The answer is yes. Now, when you add on top
02:07of those
02:07unsecured deals, these SPVs that we're seeing, when we're seeing true third-party money, like the largest
02:13private equity and credit shops in the world are now raising a half a trillion dollars. I actually
02:20think that's a little bit of a spit in the bucket. We're going to probably see those numbers triple.
02:24And where is that money coming from? It's exactly what Ed said. It's pension funds. It's insurance
02:29companies that have long dated liabilities. And now they want to put those assets to work. And they're
02:36getting real yields now to take the risk of primarily double A names that really don't have that much risk.
02:43Is that money, though, getting sucked out of other parts of this market, be it treasuries or other
02:47parts of the corporate credit market? Is all of that money getting crowded out by the need of the
02:51AI spending? Well, not really. I mean, if you look, first of all, on the equity markets, right? Alphabet
02:56is also in the process of raising $85 billion of equity. SpaceX obviously did. Anthropic is going to
03:03come. OpenAI is going to come. We've already seen names like Oracle issue equity. You're going to see more
03:09of that, I think. What's happened to most of those stocks? They've been a little bit roller coaster
03:13rides. But overall, they're up and they're up in size. So I think there's a lot of capital coming
03:18from the equity side. When you think about it from other pools, I think there's a variety of these
03:23other pools that continue to exist as well. And we're going to continue to create very creative ways
03:29of both borrowing and capital raising from equity and credit. Well, I guess part of my question is also,
03:35does it disrupt wider financial markets? An argument could be made that last week,
03:39treasury yields went higher, despite the fact we had softer CPI. And maybe the reason they're
03:42going higher is because the market needs to absorb the supply coming from hyperscalers.
03:46Yeah, I think that that reads great in an article. But in reality, it's not so much the truth. I
03:52mean,
03:52we've seen trillion dollar plus high grade bond issuance year after year after year. So
03:59incrementally, and maybe we're a little bit higher than we were last year, you know, 25%
04:03higher. And a big chunk of that is in hyperscalers. So we're getting such enormous publicity. But the
04:09reality is banks raise six, $700 million a year, and nobody says anything about it because the
04:15credit quality is there and the cash flows are there. You know, do people sell treasuries when
04:20they buy corporate bonds? Yes, a big chunk of real money players do that. But is that what's overall
04:26affecting treasury rates? I think if you have Ira Jersey on here, I don't think he's saying that
04:30treasuries are where they are because of corporate bonds. They're there because of other inflationary
04:36pressures and lots of other big macro things that are going around the globe. So if you want to blame
04:40everything on AI, go ahead. But I don't think that's where rates are where they are.
04:44So
04:44you
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