00:00Alphabet leads this AI borrowing boom that we've seen.
00:04You know, since the middle of 2025, they'd already done about $114 billion worth,
00:09but it was also split, largely US-denominated, but, you know, Euro, Swiss franc, etc.
00:16So this $3.6 billion kangaroo bond action is kind of diversifying that funding.
00:24But you're exactly right.
00:25Like even a giant like Alphabet cannot fund capex from its own cash flows.
00:31And so it needs to go to the capital markets to do that across equity and debt.
00:35But the debt investor seems very willing, you know, to support that offering.
00:41What is this money for exactly?
00:43Is this data centers?
00:44Is this other things?
00:45Why do they need such huge amounts of money?
00:47So it is for data centers and it is in financial terms for capital expenditures, right?
00:53So if you look at Alphabet's capex for 26, it's approaching $200 billion.
00:58And the expectation is that it will be much bigger in 2027 and bigger still in 2028.
01:03Something that's really interesting is that capex doesn't just go up because you've got to build more stuff, right?
01:09It doesn't just go up because you're saying, OK, well, I did 10 data centers.
01:13Now I need to do 20.
01:14It's also the cost environment.
01:15So like labor, construction, materials, power, that is also seeing some inflationary effects.
01:21And so the capex numbers also need to rise to meet that environment.
01:25Ed, what are the companies saying about longer term capex as it relates to AI?
01:30I guess I'm concerned that this extraordinary high level of capex coming from many of these tech companies, this is
01:39the new normal.
01:40You don't just build your AI and then it's there forever and your capex can go back down.
01:46It seems like this may be the new level of borrowing.
01:49Do the companies admit that or do they say, well, this is kind of a one time five or year
01:54or whatever?
01:55There is a distinction probably then between what their capital expenditure intentions are and what their borrowing intentions are, right?
02:01And what Alphabet had said after the last tranche of dollar denominated bonds is, look, we plan to borrow from
02:09the U.S. debt market twice a year.
02:11And the signal that the market took from that very explicit explanation was we've done twice this year.
02:18Are you now done?
02:19You know, and so the BI thesis is really clear.
02:23There's a lot of demand out there, hundreds of billions of dollars of demand to support that borrowing.
02:29But there is also the psychological aspect of like, when do they hit pause and stop?
02:35And the 3.6 billion Aussie offering is very small on a dollar basis compared to the 20, 25 billion
02:43they did in the two dollar denominated ones.
02:45So it seems like they're kind of tapering off a bit.
02:48So the bond market has been the subject of a lot of news this summer.
02:52Yields have been up a lot.
02:53Does this potentially affect government bond yields when there are all these bonds being issued by huge companies?
03:01You know, I might be convincing because of my British schoolboy accent and Welsh charm, but the bond market is
03:09not my forte.
03:10Technology is.
03:11So, I mean, the one thing I would say is that you can look at some of the post issuance
03:15pricing action of those technology bonds and corporate bonds and say, in some cases, SpaceX, the most notable, that those
03:23underperformed and trailed away.
03:25And the big pitch is the premium over treasuries, right, in the first place.
03:30That was partly what some of the appetite was driven by.
03:33But, yeah, I ain't a fixed income guy.
03:36I'll punt it back to you.
03:37So, Ed, real quick, Anthropic, I saw some Bloomberg reporting here, $11.45 billion in revenue in the second quarter,
03:4714-fold increase.
03:48What is going on there?
03:50Yeah, I mean, that's real revenue, right?
03:52They're prelim numbers, but that's data presented to prospective investors in a document that Bloomberg has seen, which would indicate
03:59they're having these meetings with prospective investors ahead of an IPO or as part of the process.
04:03The other data point is that they had adjusted positive operating income.
04:07And, like, if you look at some of the AI-linked stocks that are moving today, it's probably not just
04:12the idea that Anthropic's trapping towards an IPO, that it will happen, but also, like, they're finding a way to
04:17do it without endless losses, right?
04:19And lots of those names, Amazon, Alphabet, have direct investment exposure to Anthropic, but it kind of is validation of
04:26the AI trade right now.
04:28Yep, absolutely.
04:29So, hey, real quick before we let you go, are we still expecting an Anthropic IPO this year?
04:34You know, October or the fall, the fall, as we've joked about in the last two weeks, is a wide
04:39window.
04:40But, yes, that's our understanding.
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