Honesty would fix all of this.
No1
Mar 12, 2026
And then there’s AI. Which is private credit’s dirtiest secret.
The entire AI buildout was underwritten on the assumption of either perpetually low rates or revenues materialising faster than costs. Neither happened. But there’s a layer underneath that is worse.
The Trillion-Dollar Oops
No1
·
22 dicembre 2025
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GPUs - the hardware the whole thing runs on - depreciate on paper over five years. In reality they’re obsolete in 18 to 24 months, because each new chip generation makes the previous one redundant. The book value says one thing. The resale market says something considerably more honest. Which means these companies aren’t just burning capital on growth. They’re burning capital to stay still - borrowing constantly just to replace hardware that’s carried on the balance sheet at a fraction of its real economic value.
Forty percent of private credit loan books are exposed to software companies running on this hardware. The loans were written against collateral marked at book value. Book value that always was a fiction. When credit tightens and those loans need refinancing or honest marking, you ‘discover’ the collateral backing a hundred-cent loan is worth sixty cents on a generous day. The ‘trillion-dollar oops’ is still unwinding. The house of cards was built on the carpet of cheap credit - and the carpet has been quietly shrinking since rates went up. Pull what remains of it.