Bryan Whalen: AI debt issuance to double to $1 trillion

The shift Bryan Whalen describes shows up in company filings. Meta Platforms generated $784 million of second-quarter free cash flow, down from $8.55 billion a year earlier, while its capex reached $30.12 billion and long-term debt rose to $83.66 billion. Amazon reported trailing free cash flow of negative $7.6 billion, and Oracle posted negative $5.4 billion on $28.5 billion of capex after completing a $20 billion at-the-market equity program.

The financing is also increasingly circular in places. Whalen noted that Nvidia is financing over 200 companies that effectively buy its products, which he said might remind some of the technology bubble in the late 90s going into 2000 and 2001. Nvidia has partnered with Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs, and KKR to mobilize over $500 billion in third-party capital, and its supply obligations reached $279 billion.

CoreWeave has become the market's stress case, with $52 billion of debt, $640 million of second-quarter interest expense, and a 15.9% stock drop over the past week. Another layer of risk is how firm long-term chip supply agreements are; a Fast Money discussion recalled that during COVID, "people wanted to get out of those long term agreements" and said "those long term agreements are not very solid." Whalen said he remains cautious on corporate bonds until a better entry point emerges.