High-CapEx tech debt faces show-me period
The guest argued that debt from high-CapEx issuers with negative free cash flow will trade weaker as the market demands concrete results over the next 18 to 36 months.
The argument
While Shiffman expects these issuers to ultimately succeed, he noted that near-term balance sheet expansion and fast-money flippers are pressuring secondary market bond prices.
The thesis, stress-tested
✓ What validates it
- ✓Oracle bond yields rise and spreads widen relative to peer investment-grade tech debt
- ✓Capital expenditure guidance increases without a corresponding rise in near-term revenue
▸ Risks discussed
- ▸Prolonged negative free cash flow stretching balance sheets further
- ▸Persistent secondary market selling by short-term trading accounts
Hear it yourself
"So we are selectively adding, and this this weakness, what we call the summer soon swoon in technology, is likely a time when we'll be adding to some names. In your notes, which are just great, Nancy, thank you. You've got some commentary from the CEO of Uber who says 95% of our engineers now use AI coding tools monthly, and more than 10% of code is now written autonomously by AI coding agents. Boy, to try to figure out how to invest in AI, it's almost like everywhere you look, AI is impacting this economy. How do you think about trying to get full exposure, proper"
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