How Is Wall Street Loading Debt Onto Big Tech?

Ezra Klein asks whether broader society is protected because Alphabet, Meta, and the other major companies can absorb huge losses on their own balance sheets. He reads Mark Zuckerberg's line, that it would be sad to misspend hundreds of billions of dollars, as proof the spender can misspend hundreds of billions and still be fine. Ezra Klein then asks Paul Kedrosky, who has followed the private-credit side, whether the debt changes that.

Paul Kedrosky says broader society is not protected. A year ago, people told him to stop warning about the spending, because the companies are smart and have prodigious cash flows. A year later, the data shows spending moving away from cash flow and toward debt. The new line is that the balance sheets are still pristine and the credits are great.

Paul Kedrosky says Wall Street is very good at making a pristine balance sheet less pristine. It keeps raising money, again and again, because the fees are tremendous, and the credit rating declines as the borrowing grows. Oracle is already showing the decline. Microsoft is on the cusp, and so are some of the other hyperscalers. Paul Kedrosky says the cash cushion does not protect the wider economy once the buildout is financed with debt.