OK, wait a minute. Elsewhere in this discussion, people are saying that only a few of these AI companies are going to survive. For stocks, that can still be a reasonable investment - low odds, but still a positive expectation value - but for bonds, it's terrible. You're paying me single-digit interest when there's only a 20% chance that you live long enough to give me my principle back? Get outta here. Literally nobody should be investing in such bonds.
FWIW, a firm can go bankrupt and the stocks be worth zero with the bond holders being paid 100%. In fact, that's sort of the goal and "ideal" scenario (ideal given bankruptcy, of course, which in turn is not ideal).
In the real world, recovery rates for corporate bonds are between 30% to 70% or so, depending on the seniority of the debt and the collateral.
If big tech bonds are a terrible deal for investors at 8%, then Google or OpenAI is getting a screaming deal by raising debt at that rate. Saying nobody should be investing in these bonds is very similar to saying that big tech should raise more debt.
Yes, they should, if they can. But on the other side, life insurance companies and pension funds should not be buying it.
Agree with you on that. I just wanted to point out that Big Tech debt being a bad purchase for things like pension funds means its a good deal for big tech. Everyone else in the thread seems very negative on big tech debt for some reason. You can't have it both ways.