Saba Selling Credit Default Swaps on Big Tech: AI Debt and What It Means

Okay, so Saba Capital's been upping its bets against big tech, selling more credit default swaps (CDS) because these giants are piling on AI infrastructure debt. Let's be real: is this some kind of Nostradamus move, or just another hedge fund trying to make a quick buck by stirring up fear?

AI's Insatiable Hunger for Cash

Microsoft, Oracle, Meta, Amazon, Google – the usual suspects. They're all throwing money at AI like it's the only thing that matters. And yeah, it probably is the only thing that matters to their shareholders right now. But building AI ain't cheap. You need server farms the size of small countries, enough GPUs to make a gamer weep with envy, and enough electricity to power a small city.

All that "innovation" requires serious capital expenditure. Which means... debt. Mountains of it. And Saba Capital, smelling blood in the water, is betting that some of these companies might not be able to handle the load. According to a recent report, Saba sells credit default swaps on big tech firms as AI debt mounts: report - Seeking Alpha.

Is it a smart play? Maybe. These tech companies are flush with cash, offcourse. But they're also under pressure to deliver insane growth, and if AI doesn't pay off fast, things could get ugly.

The CDS Wild Card

Credit default swaps. The financial instruments that almost brought the whole damn system crashing down in 2008. Now they're back, baby, and they're being used to bet on the potential downfall of the very companies that are supposed to be leading us into the future.

The irony is almost too much to handle.

Saba's basically saying, "Yeah, you think these companies are invincible? I'll take that bet." They're selling CDS to banks, which means the banks are now on the hook if these tech companies start to falter. It's like a game of financial hot potato, and nobody wants to be holding the potato when the music stops.

But here's the thing: these tech companies are sitting on mountains of cash. They can probably weather a storm or two. So, is Saba just trying to create a self-fulfilling prophecy? Scare the market, drive down stock prices, and then cash in on their CDS bets? It wouldn't be the first time someone's tried that.

The Million-Dollar Question

The elephant in the room is: what does Saba Capital know that we don't? Are they seeing something in the financials, some hidden vulnerability that the rest of us are missing? Or are they just making a calculated gamble based on the general unease surrounding the AI hype bubble?

And honestly, that's the scarier possibility. Because if a smart firm like Saba is willing to bet against big tech based on sentiment alone, it means the market is even more fragile than we thought. Maybe I'm wrong, though. Maybe this is just a standard hedge fund move, nothing to see here.

This Smells Like 2008, With More Robots