Deutsche Bank Explores Hedges For Data Centre Exposure as AI Lending Booms (ft.com) 29
Financial Times: Deutsche Bank is exploring ways to hedge its exposure to data centres after extending billions of dollars in debt to the sector to keep up with demand for artificial intelligence and cloud computing. Executives inside the bank have discussed ways to manage its exposure to the booming industry as so-called hyperscalers pour hundreds of billions of dollars into building infrastructure for their AI needs that is increasingly funded by debt.
The German lender is looking at options including shorting a basket of AI-related stocks that would help mitigate downside risk by betting against companies in the sector. It is also considering buying default protection on some of the debt using derivatives through a transaction known as synthetic risk transfer (SRT).
Deutsche's investment banking business has "bet big" on data centre financing, according to one senior executive. However, the scale of expenditure on AI infrastructure has prompted concerns that a bubble is forming with some likening the enthusiasm to that which preceded the dotcom crash. Sceptics have pointed out that billions of dollars have been deployed in an untested industry with assets that quickly depreciate in value due to the rapid change in technology.
The German lender is looking at options including shorting a basket of AI-related stocks that would help mitigate downside risk by betting against companies in the sector. It is also considering buying default protection on some of the debt using derivatives through a transaction known as synthetic risk transfer (SRT).
Deutsche's investment banking business has "bet big" on data centre financing, according to one senior executive. However, the scale of expenditure on AI infrastructure has prompted concerns that a bubble is forming with some likening the enthusiasm to that which preceded the dotcom crash. Sceptics have pointed out that billions of dollars have been deployed in an untested industry with assets that quickly depreciate in value due to the rapid change in technology.
What if there is a breakthrough in efficiency? (Score:1)
Hi,
What if there is a breakthrough in efficiency (remember when Deepseek came along?), and big data centers are no longer required? The "basket of AI-related stocks" would benefit, as cost would drop for them.
No idea how shorting them would provide downside protection for investments in oversized data centers.
What if there is a breakthrough in sanity? (Score:5, Insightful)
Does anyone remember 2007/8? Some banks bundled up various forms of debt - some good, most bad - and sold them on... it all ended badly for everyone except the banks.
AI is a bubble waiting to burst, and DB deserve to take a bath on their AI/DC debt.
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Basically this is saying they are looking to offload risk.
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The eu loves its dirty money business. Major tax havens there.
Nothing else to invest in, leverage and hedge (Score:2)
The big banks and financial industry need a larger and larger amount of economic disruption, new industries, new building projects, new technologies, and new places to invest, hedge against, sell credit default swaps on, advise on taking public IPOs, and M&A deal advisory fees.
Those all need an increasing amount of financial paper to be created and trade hands earning fees for the bankers and finance industry.
They also always need the next big thing to pump up and create financial activity for to ensure
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Also, I distinctly remember banks giving a loan to anyone with a pulse despite the rules saying otherwise as well as double or even triple mortgaging the same property.to different people.
As for the banks, it did end badly, right up to the moment the taxpayers were once again held at gunpoint and told to hand over their money. Tha
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Come to think of it, this article is probably here because someone wants to point out that there is a big lender starting to worry about a potential bubble.
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Well, it looks like DB remembers, why do you think they're hedging?
Do you remember the housing bubble? The banks hedged then too. They bundled loans into mortgage-backed-assets that they sold on the investor markets -spreading the risk to individuals and hedge funds (aka our retirement accounts). When the bubble popped we all lost because of the banks hedging their bad loans.
If the AI datacenter bubble pops, we will all be left holding the worthless loans. Our retirement funds. Our government's bailing the banks out.
There were supposed to be new banking rules put in p
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> Do you remember the housing bubble? The banks hedged then too. They bundled loans into mortgage-backed-assets that they sold on the investor markets -spreading the risk to individuals and hedge funds (aka our retirement accounts). When the bubble popped we all lost because of the banks hedging their bad loans.
That was more fraud and not so much hedging. They sold their risky investments. A hedge would be protecting their investments by shorting the AI companies, like the summary mentions.
Blame the voters (Score:1)
Post 2008 we put some of those laws back in place and once again along comes the voters to put Trump in the White House and away goes all those regulations.
People really really hate bureaucrats because they have to wait in line at the DMV.
But in our country laws rich people break are enforced by bureaucrats. And those rich people have spent an awful lot of m
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thats just a lie
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Bureaucrats don't enforce laws, they're middle management. They produce and process red tape to look important. The analysts, investigators, and prosecutors t
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What do you mean was bad for everyone else? Housing plummeted. I bought my first condo in 2010 in San Diego for 118k. During 12 years of ownership, it raised up to 400k when I then solid it. I probably could of got a bit more but was doing through a divorce and wanted out. So essentially, in 12 years, my home more then tripled in value.
I'd say that was a nice win for me.
Now, I'm waiting patiently for another market failure that will cut deep enough that it will force equity firms to sell off their assets. I
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Shorting would shield against a bubble bursting because they'd recoup a large portion of the defaulted loan, but it only makes sense if they do it shortly before a collapse. What really doesn't make sense is betting against someone you just lent a billion dollars.
What if your mommy bought you a pony? (Score:2)
Wouldn't that also be nice?
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> What if there is a breakthrough in efficiency
Slashdot had an article a few days ago about analog computers using RRAM. Still in research in China, but given the amount of money involved it will probably be fast-tracked to Chinese data centers (if the tech delivers what's promised). The summary mentioned "up to 1000x the performance and 1/1000 the power requirements. Not buying that, but even 10x or 100x would wreak havoc on traditional GPU based digital solutions.
SRT = CDS = here we go again (Score:2)
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Beats betting on Epstein, I guess (Score:1)
Everyone else might want to think a little bit about their 401K allocation.
2008 again (Score:2)
We don't trust our borrowers, so package up the debt and sell it to someone else then lend some more. Rinse, repeat, crash, boom.
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The SRTs though, I don't know. It sounds like there are a lot of rules around them to prevent 2008 issues, but they're also in that same realm of financial mystery that mortgage-
Only now? (Score:2)
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Probably just took out reinsurance policies. That won't work if they all come tumbling down and the insurance companies claim an act of god or something. ..
I'd like to place some shorts too. I'm not an institutional investor so
AI Lending (Score:2)
I thought this would be about banks using AI to make decisions to who to lend money to. I am disappoint.