Subsea Cables & Internet Infrastructure

The human mind is far more energy efficient than large language models. Even a genius like Einstein or Poincaré used 30 watts max to power their brain. 🙂 In contrast, estimation of META's Lama 2.0 front tier model required 700 MWh, and later versions much more. AI service providers are using brute force in terms of lots of resources such as power and GPUs as opposed to design improvements in their struggling attempt to achieve human intelligence and creativity. Throwing lots of power and GPUs at the challenge will probably not lead to the Singularity as larger models yield less and less incremental return. AI advocates calls it 'scaling', but I call it 'diminishing returns'. 😀 As a result of the brute force approach, AI service providers are losing money on their $20 a month subscription plans. VC money is currently paying not just for the service provider's infrastructure, but also subsidizes the end user pricing. For example, in New York video rendering comp...

Bulk Infrastructure, the Nordic data center and transport player, wants to build a subsea cable linking Norway to Canada for an estimated $620 million. While I applaud Canada for standing up to Bully Trump, this project is fundamentally flawed 1. Most Canadian Internet traffic peers in the US at Secaucus Equinix or in Chicago. It does not go to Europe and the same holds for voice traffic. Most Canadian international calls are to the US. None of this should surprise anybody. Nearly 50% of Canadians live within 100 kilometers of the US border and the two countries are each other's other largest trading partners. Bulk's project has no firm economic foundation. I worked at Hibernia Atlantic for six years from 2005 to 2011, the only high capacity cable directly linking Canada to Europe. Canadian transport demand to Europe was tiny. European transport demand to Canadian destinations was almost non-existent. Internet traffic between the US and Canada is many magnitudes bigger than be...

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...