Nvidia’s Risky Business
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- Microsoft is the only hyperscaler whose AI infrastructure CapEx isn't funded by debt, posting $19.6B in free cash flow last quarter; CEO Satya Nadella called Liaquat Ahamed's "1873" "the book to be read" on the recent earnings call.
- Oracle, Meta, Alphabet, and Amazon issued $80B in debt between September and November for AI infrastructure, and after raising $108B total in 2025, the four had raised $194B as of July 7 of the current year.
- Credit conditions are deteriorating: 86% of bonds issued this year by these hyperscalers are already trading at higher yields than at issuance, and cover for new issuance has collapsed from 5x in February to under 2x.
- Google announced it would raise $85B in equity, including a special $10B issuance to Berkshire Hathaway, which the author framed as a "signaling mechanism" endorsing the company's compute bet.
- SemiAnalysis declared Gemini "Cooked" after the departures of Demis Hassabis (promoted to chairman), Jeff Dean, and other DeepMind researchers, writing that DeepMind's "odds of reaching SOTA again have dropped to zero."
- The biggest winner from the DeepMind shakeup is Google Cloud, per SemiAnalysis, since CEO Thomas Kurian "won" the internal compute allocation fight against Gemini, and GCP revenue growth is expected to meaningfully accelerate.
- Sergey Brin is reportedly deeply involved and closely allied with new DeepMind CEO Koray Kavukcuoglu, suggesting Google is pivoting away from Hassabis's "world models" vision toward something more directly competitive.
Why it matters: The 1873 parallel isn't decorative: when Jay Cooke ran out of bond buyers, his firm's bankruptcy triggered the Panic of 1873. Today's AI buildout shows similar strain — 86% of 2025's hyperscaler bonds already underwater, cover ratios down from 5x to under 2x, and $194B raised by four companies alone. Microsoft is the sole outlier still funding from free cash flow.
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