MarketKapper

Meta is financing a $27 billion AI data center through a company called Beignet Investor LLC. Its next one? Sopaipilla Investor LLC. I'm not making this up. Big Tech is now funding the AI boom through off-balance-sheet vehicles named after fried dough. And that's not even the scariest part. I spent a week in the filings. Most of what I found isn't in the headlines. Microsoft, Google, Amazon and Meta will spend roughly $735 billion on AI capex this year. Triple 2024. By 2027 it's heading for about 3% of US GDP. The telecom bubble peaked at 1.2%. The 1830s railway mania peaked at about 2%. We are building past both. And the cash has run out. Google, Meta, Amazon and Oracle now spend more on capex than their businesses generate. Google just posted negative $9.1 billion of free cash flow in one quarter. Its long-term debt nearly tripled this year to $125 billion. Meta hasn't bought back a single share in 2026. Oracle told investors it won't be cash positive until the second half of fiscal 2028. Its stock went up 11% on the news. Here's the part I think the market is missing. When these companies lease a data center, it doesn't show up as debt or capex. It shows up later, as rent, paid out of operating cash flow for 15 to 30 years. Leases signed but not yet started: 1) Meta: $356 billion (up from $279 billion three months ago) 2) Microsoft: $329 billion 3) Oracle: $288 billion (up from $100 billion a year ago) 4) Google: $85 billion, plus $924 billion of other purchase commitments That's over $1 trillion of rent that hasn't hit yet. My rough math on what that rent does when it starts: - Oracle: about 53% of its operating cash flow - Meta: about 18% - Microsoft: about 11% Oracle's lease costs already doubled in a year. Most of its leases haven't even started. Remember when Microsoft "cut" its 2026 capex guide from $190 billion to $175 billion? Headlines called it discipline. It wasn't. Its CFO said the plan is unchanged. New data centers just moved into operating leases, which don't count as capex. The $15 billion didn't disappear. It moved somewhere you don't see it yet. Now back to the donuts. Meta owns 20% of Beignet. Blue Owl owns 80%, so the $27 billion of debt sits on Blue Owl's books, not Meta's. But Meta guarantees the building's value if it walks away. That guarantee just jumped from $28 billion to $41.5 billion this year. Meta records a liability of zero. It calls a payout "not probable." Who bought the bonds? Pimco reportedly took about $18 billion. Across Beignet and one Oracle deal, Pimco holds roughly $28 billion. That's your bond fund, your annuity, your pension. The Beignet bonds have already fallen to about 91 cents on the dollar. So who are the customers for all this? Roughly 40% of Big Tech's $2.4 trillion order backlog traces to two companies that lose money: OpenAI and Anthropic. Their compute commitments are about 10x their revenue. And who funds them? The same companies selling them the compute. Microsoft put $13 billion into OpenAI. OpenAI promised $250 billion back to Azure. That's $19 of sales for every $1 invested. Amazon put $50 billion into OpenAI. Got $138 billion back. Nvidia took a $30 billion OpenAI stake and reportedly offered up to $105 billion of credit support for a data center that will be filled with Nvidia chips. In 2000, Lucent lent its customers about $7 billion so they could buy Lucent equipment. When the customers went bust, so did the backlog. The circle is already starting to bite. Last quarter Google booked a $99 billion gain on its stakes in Anthropic and SpaceX. This quarter the SpaceX stake fell and knocked about 55 cents off Google's earnings per share. Circular deals inflate profits on the way up. They do the opposite on the way down. Want to know what Microsoft's name is worth? IREN, a GPU cloud, borrows at 6% when a Microsoft contract backs the loan. Everything else costs 9%. CoreWeave pays up to 15%. Its bonds trade around 14.5%. Its default insurance implies about a 60% chance of default. Most of the leverage in this system sits with companies that don't have Microsoft's name on the contract. And the collateral is shaky. The last time GPU supply caught up with demand, H100 rental prices fell 79% in two years. They've only recovered because capacity is scarce again, and Nvidia now ships a new generation every year. A lot of this debt is secured by chips whose value already fell 79% once. Capex isn't even the only bill. R&D jumped 32% at both Meta and Google. Microsoft cut its R&D headcount for a second straight year to pay for the build. AI now hits these companies three times: capex, rent and R&D. So who holds the bag? Not Microsoft, Google or Amazon. They'll survive. US life insurers hold $85 billion of AI-related assets, up 24% in six months. In the ECB's stress test, pension funds lose 5 to 6% of their assets. Banks lose almost nothing. Nvidia, Apple and Microsoft alone are a record 21.7% of the S&P 500. The head of the IMF said it this month: "We now have an economy that is standing on one leg, the AI leg." We've seen this movie before. After the fiber bust, bondholders got back 16 cents on the dollar. Global Crossing went from $47 billion to a $250 million sale. Cisco took 26 years to get back to its 2000 high, and only because of this boom. AI is real. So was the internet. So were the railroads. The people who paid for them first still got wiped out. The question isn't whether AI wins. It's who's left holding the beignet. Check out my website. I built a presentation on all of this mess. deepfuckingvalue.com/ai/#cha…

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