Subsea Cables & Internet Infrastructure

Nscale has only one major client, Microsoft, and they just cancelled. So its IPO, desperately needed to finance operations and investment, is unlikely to happen. Last week another neocloud, Australian Firmus, was forced to cancel its IPO when investors decided that the company was not worth $35 billion based on 2026 fiscal year revenues of $51 million. On top of all this, we have Coreweave's long term bonds yielding 16%. As those rates, public financing makes no sense and the company needs private financing to avoid default on its existing debt.  Investors should not confuse big orders with success. Companies must be able to deliver in a timely fashion. In the case of Nscale, they could not meet the delivery date for the data center because they could not secure the required power until the next decade. Moreover, the big and growing order backlogs in the AI data center sector reflect not just strong demand, but the difficulty of building these data centers and equipping then. The c...

Nearly half of AI data center debt issued in 2026 is rated high risk (junk category). These bonds generally yield market rates today between 7% and 16%. So if data center company A's bonds yield 15%, then any new debt will probably be priced at 15% or above unless the debt has special features like collateral or equity conversion options. Yet the stock market is valuing these companies much more generously than their bond market counterparts despite persistent net income or net operating losses. Who do you trust? Well, the bond market is an income and risk calculation machine. It is not susceptible to fads or hero worship. Risk miscalculations are possible, but corrected immediately as new information arrives. In contrast, Warren Buffett has noted that short run the stock market is a voting machine and long term a calculating machine. So popularity dominates short term, but long term the wealth created is the sole consideration (present value of net operating cash flow). Hence a wi...

The International Cable Protection Committee has conducted a statistical study using an 18 year time series that includes 3,000 repairs. A link to the article is attached to this post. A fault is any damage to a cable that affects performance or might in the future (like a shunt fault). 1. Fault rates per kilometer of cable have dived over the last two decades. Total annual repairs range between 150 and 200, yet total subsea cable mileage has risen from 900,000 kilometers in 2008 to 1.4 million today. However, this underestimates the decline as fibre pair mileage is probably 5x greater today than in 2008 as fiber pairs per cable have risen from 4 pairs in 2008 to 16 pairs today. 2. Faults in European waters and the Atlantic have dramatically declined due to better burial of subsea cables, distributing cable maps to commercial ships, more careful cable routing, and less fishing in some waters. For example, Northwest Europe, which includes Ireland, UK, France, Iceland, Belgium, Netherla...

According to Coreweave's CEO, "The market is being irrational". Except it is not. The company's quarterly interest payments are 4x its quarterly operating income. The company has simply too much debt and cannot grow revenues fast enough to internally finance interest payments. Right now Coreweave's liabilities-to-revenue ratio is 4.1. This includes bank loans, bonds, and long term leases. Moreover, revenues are a tiny fraction of capital spending.  Consequently, most investment spending is debt financed, but the debt markets are now closed to Coreweave because it would be forced to pay what its current long debt is yielding, namely 15% to 16%, usurious rates. In addition, its order backlog is growing due to a faltering supply chain, and global interest rates are steadily rising.  The most common CEO lament during the 2001 dotcom crash was, ironically, the market is being irrational. 😉 The current price to insure Coreweave's bonds against default implies a 60%...

This project will deploy the first fibre optic cable to connect connect Ireland to Continental Europe. Pisces provides a unique route that sharply improves the resiliency of Ireland's connectivity to the rest of the world. The EU loves projects that bypass non-EU countries and directly ties together EU member states. As the UK is notorious for surveillance, it is particularly welcomed. Consortium members include the Irish subsea permitting firm, MDM, an equity fund appropriately named Equitix, and Orange. The cable will have 16 fiber pairs. I estimate aggregate throughput will be at least 320 Tbps. I admire the unique routing of this system. What is not clear to me is the hyperscaler demand for its capacity. Microsoft has agreed at least in principle to take a fibre pair. There is certainly a prima facie case for Google and Amazon to take single fibre pair IRUs on the system because it will improve their own network's resiliency. However, that advantage must be balanced against...

WACS has a lower latency than Equiano between Lagos and Lisbon, but you are going to pay a high price in outage time if history proves a good guide. The ACE record is significantly better than WACS, but both systems are light years behind Equiano. For reliability Equiano wins hands down. In fact, if you can only afford one cable and Equiano has your desired route, Equiano is the way to go. See the three cable's outage performance below. Equiano: RFS February, 2023. Wet system cumulative outage hours: 0. Dry System: Under 48 hours. WACS RFS: May 2012. Wet system cumulative outage hours: 4,903. Dry system outages: 140. Downtime/System Operational Life Span: 4%. ACE RFS: December 2012. Wet system cumulative outage hours: 2,472. Dry system outages: 70. Downtime/System Operational Life Span: 2%. What adds salt to the wound is that force majeure protected the capacity owners from any obl...