Mike Simanovsky

Zverev gave an emotional speech after winning the U.S. Open about his mom and how she helped him achieve his dreams despite struggling with diabetes “I wanna thank one more person who’s never actually watching my matches but is the most important person in my tennis life and in my life in general. When your 4 year old son gets diagnosed with diabetes, and doctors in the office tell you that life and sports will be very very limited for that child, it takes a very very strong mother to walk out of those offices and say ‘My son will be wherever he wants to be. If he wants to be a tennis player he’ll be a tennis player. If he wants to do something else, he’ll do something else. But this illness will not define us.’ My mother is the most important and strongest person I know. It takes an unbelievably strong woman to do what she did.” 🥹

Spending a week with my family and working most of it! Being a few hours ahead of US markets has given me some time to digest a lot of incredible markets discourse on X - there is too much to try and consume about AI but not enough about leverage. We are seeing a classic head hunt of the most levered players in the equity and convert market re AI globally. Hyperscaler and associated credit spreads in IG are wider as they should be (portfolio construction by notional and duration matter in credit because we don’t have the payout that equity does) and debt is being added to compute and power as another constraint on the AI theme. Govt regulation remains a massive wildcard but a longer cycle isn’t necessary a worse one. I would look for the forced sellers of assets trading at or below contract value with counterparties you feel good about that have positive optionality on growth opportunities. Think about the impact on spot and next 1-2 year curves for compute, power, and shell - those who are long and don’t need financing + can term out contracts now are materially advantaged. If this is the whole cycle being elongated and the curve flattened there are a lot of interesting securities to buy from forced sellers. More time for competition and technology to emerge in the intermediate term isn’t necessarily a bad thing for many infrastructure assets. I started my career in the middle of the early 2000s telecom cycle - Nortel, Lucent, Cisco, etc were financing their customers. There have been some very astute comments on this platform from people who understand the AI echosystem far better than I do about Nvidia and Broadcoms business model decision to become the working capital bank of the AI build - bridging the industry to revenue and cash flow. My sense is the focus in credit markets right now is too much on Meta Google Amazon etc and not enough on that business model change which liquifies the compute roll out in the near term and shifts the credit risk to those large semiconductor companies. It’s fun to seeing liquidity having a price again and god forbid IG companies cost of debt having to compete with their cost to equity.