AI Companies Are Trying to Hide a Staggering Amount of Debt • Hacker News Board

Re: AI Companies Are Trying to Hide a Staggering Amount of Debt

#221

Post by zer00eyz » Thu, Jul 23, 2026, 7:11 PM UTC

tyleo wrote: post #73

skohan wrote: post #62

Earlier quoted context omitted.

Couldn't it be a problem given the concentration of the S&P in these companies? At this point these companies make up a huge portion of 401k's for a huge chunk of Americans. How would it affect retirees if they dropped 40-50%, likely taking the market with them?

It’s an interesting thought. The growth is so extreme that if the S&P 500 fell 50% today it would reach levels last seen in 2022. Given that the timespan is so short, I’m honestly not sure it would be as bad for 401ks as people expect unless all of your investment was concentrated in the last 4 years. I suppose it’s worse if your calculation is, “I’ll retire when my 401k hits $X absolute value,” but I think most peop…

Inherited IRA's, if you aren't the spouse, have some pretty strict draw down rules.

As the boomers die off - if they have these accounts - their kids are quickly going to be forced to liquidate them over the course of 10 years. With some of them having to sell a chunk annually.

Re: AI Companies Are Trying to Hide a Staggering Amount of Debt

#222

Post by AnimalMuppet » Thu, Jul 23, 2026, 7:14 PM UTC

muellero wrote: post #215

AnimalMuppet wrote: post #208

Earlier quoted context omitted.

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 nob…

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.

Re: AI Companies Are Trying to Hide a Staggering Amount of Debt

#223

Post by barchar » Thu, Jul 23, 2026, 7:15 PM UTC

toomuchtodo wrote: post #139

Imustaskforhelp wrote: post #137

Earlier quoted context omitted.

During the dot-com crisis. Nasdaq fell around 78% from its peak and S&P by around 49% so it isn't unprecedented (ironically has both aspects of being both tech and are within the same time-era) It created an actual recession albeit thankfully short one for the case of dotcom (sadly not for 2007) and a really recessionary environment which causes unemployment and just straight up fear and panic. I do understand what y…

> (supposing that they had their investments in stocks, I wouldn't consider that any retiree would have all their money in stocks but there have been some other comments which show a sizable amount, @kipchak's comment shows 50% stock for retirement. so a 50% shock on top of that could lead to a wipe out of 25% of your retirement fund which is honestly still pretty crazy.) What do you think the cost would be for prote…

It would cost an extreme amount. The only reason to do something like that would be to defer capital gains into retirement while protecting your position.

You can use a collar for this at somewhat reasonable cost. Not sure how rolling that would compare to just using it to defer until you can cheaply sell and buy some fixed income ladder. Probably badly.

Also, there’s no capital gains to defer if you use a retirement account, which will be a better place for fixed income anyway.

Re: AI Companies Are Trying to Hide a Staggering Amount of Debt

#224

Post by jandrewrogers » Thu, Jul 23, 2026, 7:17 PM UTC

anthonypasq wrote: post #123

skohan wrote: post #95

Earlier quoted context omitted.

The problem some have pointed out is that these companies are such a huge portion of the market right now. The sound advice for the past decades has been, just invest in a low-cost ETF tracking the S&P instead of picking stocks to minimize risk and invest in the market broadly. So a huge number of people have done that, believing they're diversified, while tech makes up 40% of the index. Yes you could sell your S&P a…

no one that needs to rely on their investments for their actual retirement still has them in equities. theres a reason target date funds automatically adjust asset allocation as it nears its target date. you should be in majority bonds and cds well before your actual retirement date.

That is an overly conservative approach that sacrifices a lot of growth for not much more safety. It also exposes you to inflation risk, which is a significant concern these days.

Most people in actual retirement I know do something like keep ~2 years of cash in short-term treasuries and everything else in equities. That gives you a lot of buffer to time-shift equity drawdown, which is the main risk with equities, while retaining almost all of the benefit of equities. Simple and relatively robust.

Re: AI Companies Are Trying to Hide a Staggering Amount of Debt

#225

Post by rvz » Thu, Jul 23, 2026, 7:25 PM UTC

This is the tech industry's version of 2008.

Re: AI Companies Are Trying to Hide a Staggering Amount of Debt

#226

Post by luckydata » Thu, Jul 23, 2026, 7:25 PM UTC

luckydata wrote: post #129

Noaidi wrote: post #61

Earlier quoted context omitted.

It is not just that they have the debt, it. is they are trying to hide the debt. Why would a legitimate company try to hide their debt?

they aren't trying to hide anything, those are accounting rules that are applied to the letter. I'm feeling like I'm taking crazy pills whenever I see this stuff about AI, your hate boner for a specific technology shouldn't trigger you saying things that are provably untrue.

the downvotes are just further proof of how stupidly this kind of discussion is handled on hacker news. It's demoralizing the lack of quality this community shows lately.

Re: AI Companies Are Trying to Hide a Staggering Amount of Debt

#227

Post by smallmancontrov » Thu, Jul 23, 2026, 7:27 PM UTC

light_hue_1 wrote: post #216

MattGrommes wrote: post #191

Earlier quoted context omitted.

When you're headed into retirement, one possibility is to shift to saving more in cash-like options instead of a 401k (or whatever). It's should just be part of your retirement plan to account for possibilities like this.

And lose the tax advantages? That's crazy

The tax advantages of being forced to pay ordinary income rates on your distributions as compared to long term capital gains (which are low, capped, can be exercised before a tax hike, and avoided entirely if you just need collateral)?

Re: AI Companies Are Trying to Hide a Staggering Amount of Debt

#228

Post by HDThoreaun » Thu, Jul 23, 2026, 7:38 PM UTC

theredleft wrote: post #177

wongarsu wrote: post #53

Do they? Is a company with $200 billion annual revenue and earnings (EBITDA) of $100 billion having $420 billion of off-balance-sheet debt really staggering? In many other industries that would be a perfectly normal amount of debt to have. It's only unusual because we are used to tech companies having so much cash on hand they don't know where to put it

brother read those numbers out loud If I make $200k I do not have $400k off-balance gambling debt

This "debt" is almost solely rental style deals with datacenter constructors. If you make 200k and have a 400k mortgage youre doing just fine.

Re: AI Companies Are Trying to Hide a Staggering Amount of Debt

#229

Post by aftbit » Thu, Jul 23, 2026, 7:38 PM UTC

senshan wrote: post #98

aftbit wrote: post #83

Earlier quoted context omitted.

I disagree - high leverage inherently makes systems less stable.

You probably meant to say that practically, high leverage tends to leak into companies of public interest. For example, when high net worth individuals start trimming their private credit holdings, which eventually end up with insurers. That is why the regulators have to watch carefully that it does not happen.

No, I meant that having a lot of debt puts you in a position to be more vulnerable to any kind of negative outcome. Intuitively, this seems to hold true across the spectrum from the personal level to the government level.

If a person has a lot of debt and no savings, and they lose their job, then they will find themselves in trouble a lot faster than someone who owns their home and car and has 6 months in a savings account.

If a company has a lot of debt, they might find themselves in trouble with credit rating agencies as soon as they have a bad quarter. Or they might have cashflow issues if rates increase. Both of these can lead to an accelerating negative feedback loop.

Governments (at least those with fiscal independence) have a unique set of tools to work around this situation, but they too can struggle with high debt loads acting as a drag on future prosperity.

Debt plays a critical societal role in allowing new production in advance of revenues, but it can also be a dangerous trap.

These AI and tech companies are priced as if they are still running a capital-light, 0-marginal-cost SaaS business. That's no longer what's happening. This economic engine makes up a substantial amount of both the value and the growth in the American stock market.

If there's a loss in confidence, high leverage will make things fall faster. This could be infectious. Not just the AI and tech companies, but the whole market might suffer.

Re: AI Companies Are Trying to Hide a Staggering Amount of Debt

#230

Post by HDThoreaun » Thu, Jul 23, 2026, 7:40 PM UTC

skohan wrote: post #50

chasd00 wrote: post #23

Are they really "trying to hide" this debt? I think it's pretty common knowledge that a lot of these companies are using debt/bonds for funding. The debt not showing up where the author wants is a reporting formality not an attempt to hide it.

If it didn't matter, why would they bother jumping through hoops to keep the debt off their balance sheet? In the run-up to 2008 a big factor in the bubble forming was that poor quality loans were packaged in a way to hide the risk in those investments. I'm not expert enough in finance to know if it's the case now, but we do know that clever accounting to hide debt can lead to the incorrect valuation of assets, poten…

Because this isnt actaully debt. Almost all of it is agreements to pay for completed datacenters from developers. Its just a way to offload operational risk when constructing datacenters. If the construction somehow fails theyre not stuck with the bill.