Hyperscaler Debt

There use to be a time that people said that owning debt of the MAG 7 is better than owning the debt of the US government. And their idea is simple which is, these large tech companies have a balance sheet with strong cash flows, low leverage and abundant cash that makes them more attractive to own than the US government.

But now with these companies taking on massive amounts of debt, we are seeing a switch to that sentiment. If you look at the hyperscalers of the tech companies and compare it to their debt they are trading at double digit spreads to their debt levels. The market is clearly worried about the massive demand for debt from these companies. As of right now even though these businesses are making massive amounts of money, their operating cashflows are decreasing rapidly which is the money they use to pay back the debt.

The market is pricing in that and supply of debt in the markets giving investors the option to ask for more. Good time to look at it!