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...