Subsea Cables & Internet Infrastructure

Coreweave is a startup AI Data center play. It makes Oracle look downright healthy and athletic. While Oracle's legacy software business generates a lot of cash flow, Coreweave totally depends on external financing in the form of stock sales and debt. Moreover, Coreweave has exactly the same problem as Oracle, namely high customer risk. Coreweave's main clients are Microsoft, META, and OpenAI. Now Coreweave claims to have a $100 billion backlog. But the Devil is in the Details. No contract is valid if Coreweave cannot deliver power, GPUs, and space to fulfill them. And that is exactly the probem. Demand vastly exceeds supply with no relief in sight for years to come. Secondly, it is likely that OpenAI and Anthropic are issuing more compute requests than they actually need given their soft commitment contracts. So if you add up the backlog across all customers, it probably vastly exceeds real demand.  These key fundamental factors are the same as in the case of Oracle. An AI da...

AI data centers are extremely capital intensive. Indeed, much more than a standard data center due to the power infrastructure, bare metal servers, and GPUs. But whereas most capital intensive industries have low operating expenses, the AI data center has very high operating expenses as many facilities require hundreds of megawatts or in some cases gigawatts of electricity. So this leads to a high capex, high debt business model combined with high operating expenses. Not to mention, low customer switching costs since AI service providers generally just download their data and models into these bare metal servers and estimate them. Hence, the balance of power generally favors the customer, AI service provider, as opposed to the standard data center model where customers incur very high exit costs. The result are contracts with no penalty termination clauses and 60 to 90 days cancellation notice requirements. In Oracle's case all of its free cash flaw has evaporated due to the immens...

AI data centers has two challenges: big capex requirements and high operating expenses due to the skyrocketing cost of electricity and the power intensive nature of GPUs. Another challenge is low customer switching costs. A customer like OpenAI or Anthropic rarely puts equipment into an AI data center. It simply downloads its software into the data center's bare metal servers, estimates its model, and then uploads the estimated model back to its own servers. In Oracle's case, it has only one major customer and hence faces huge customer risk. AI data center contracts tend to be soft and often include no penalty cancellation clauses with 60 or 90 days prior notice. This AI data center business model only works if the vendor has access to cheap electricity like hydropower in the Nordics and lots of  customers as oppose to one or two large ones. Solar and wind power do not generally make the grade because their fully loaded pricing is in fact quite high. In the case of Oracle, the ...

 META Loses $310 Billion In Stock Value In March: The AI Meltdown Begins In March alone META's market cap fell $310 billion driven by poor financial performance. The key metric is free cash flow, which equals cash profits minus capital expenditures. In the end free cash flow is what investors want, namely oney they could put in their pockets without impairing company operations. META's free cash flow is expected to be only $8 billion this year down from a 2025 figure of $46 billion. The company's massive AI investments are not yielding much revenue and hence are driving free cash flow to zero.  Unfortunately, the emerging AI crash will affect our industry. I anticipate the very expensive Waterworth project could be cancelled as well as other projects. AI is Zuckerberg's second big mistake. The Metaverse was his first. He only remains CEO because he is the majority owner of a special class of voting shares that gives him ten votes per share versus one vote per share for ...