*Sigh* No Ed Zitron, AI bond issuance is not AI’s "Subprime Mortgage Crisis”
EDITORIAL NOTE: Given the importance of this issue, and in a desire to be fair when writing such a critical piece, I sent a draft of this article to Ed Zitron to review and give his response to. I've clarified a few points here and there in response to his comments but we mutually decided that it would be best for him to lay out the core disagreement (or misunderstanding) between us in a response piece that I would then respond to. Keep that in mind, and Ed's graciousness in response to harsh criticism, when reading this piece.<br>It may be a few weeks until Ed can respond to me, given his busy work schedule. Please give him summer grace, especially since he only saw the details of my criticisms- and replied very rapidly- yesterday. He wants me to briefly clarify that the crux of his response will focus on the potential scale of investment expenditures that are not coming from the “big four”, particularly based on the projections of these smaller companies.<br>Recently I saw a piece from popular AI Boom commentator Ed Zitron entitled “The Subprime Data Center Crisis”. I’ve long been critical of how often the topic du jour is analogized to the Great Financial Crisis of 2007-2009 so I knew I would read the piece critically and likely feel the pull to write about it. I did, hence the piece you’re reading right now. Long time readers will recall my critical commentary on a June 2020 Atlantic piece from Berkeley law professor Frank Partnoy which compared Commercial Mortgage Backed Securities to GFC era “Collateralized Debt Obligations”.<br>Since I am still working my way “towards” commenting on the AI(LLM) boom, I will avoid getting into the specifics of Zitron’s claims about the size of the “compute sales” market which must grow to validate AI(LLM) data center investment. In fact, I think my claims below hold even if Ed’s worst case scenarios of abandoned partially or fully constructed data centers come true.<br>So let's get into it. Before getting to Ed’s piece however, let's examine the big picture.<br>When thinking about the possible effects of the AI boom and subsequent bust, we have to keep the headline financial facts in mind. These are as follows:
This post is for paying subscribers only
Subscribe now<br>Already have an account? Sign in
Subscribe
Tip!
Printer Friendly Version
Institutional Subscriptions
Sign up for Notes on the Crises
Currently: Comprehensive coverage of<br>the Trump-Musk Payments Crisis of 2025
Subscribe
Email sent! Check your inbox to complete your signup.
© Nathan Tankus