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Banks turn data centre loans into 2008-style financial time bombs

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An asset bubble is an opportunity. By late 2024, financiers were already constructing collateralised GPU obligations, lending against video cards.

CoreWeave borrows against its Nvidia GPUs — which have a useful life of maybe two years. CoreWeave then uses the loan to buy more Nvidia GPUs. This is fine.

Investment banks have been hard at work creating “novel types of debt structures” since then. What a great phrase that is.

Now banks and private lenders find themselves stuck with a large pile of horrifyingly rickety loans for data centres.

Why did they make these loans? Did they not realise everyone involved is a dissolute clown? Sure, but it’s where the numbers are! You get to write down loans on your books as assets with a big number on them! The lenders dived into AI lending head first.

And they’re realising this debt is the sort that isn’t good. The AI company borrowers would have to pull off several financial miracles to make all this pay off. And they’re really not going to.

So what do the banks do? They wrap up the radioactive poop bomb in a lovely package with a bow on top! From the FT: [FT, archive]

Groups including JPMorgan Chase, Morgan Stanley and SMBC are trying to find ways to distribute portions of data centre-related deals to a broader range of investors.

A collateralised debt obligation is when you take a pile of debts, you slice the pile into “tranches” based on how risky you can claim the debts are, and you sell the tranches as investments to fresh suckers.

If some of the debts fail, the least-risky tranches get paid out first! But they get the lowest interest. The riskiest ones get paid out last, but they get the highest interest. If everything goes well.

What happens if the wind changes and the whole sector goes bad, like housing did in 2007? The least-risky tranches get some payout. The rest go to zero. This causes problems that have names like “great financial crisis”.

As with collateralised mortgage obligations in 2008, the lenders know very well these data centre loans are shaky, and they want to spread the risk — and there’s quite a lot of risk, because these deals are stupidly big:

The efforts showcase the unprecedented scale of borrowing that underpins the AI sector and the pressure it is putting on lenders. Oracle and CoreWeave, two data centre operators, have borrowed hundreds of billions to build sites across the US for AI labs.

These deals cannot work out. The customers don’t exist. The entire population of the earth is not going to pay a couple of thousand dollars each a year for lying chatbots. These are bad debts and, at some point, the banks will have to admit that.

What happens when the AI bros go broke? A lot of lenders will mark massive losses. Banks and private credit will be hit hard.

In 2008, you had chain reactions where one company going down took down other companies and the US government eventually had to step in and bail them out to save the economy.

I’m not sure this particular part of the AI bubble crash will be at that level of disaster. There’ll be lots of other bad things happening. But I do predict fire sales of all the lenders’ other assets. As all these book assets out to be fairy gold — but they’re still liable for it.

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mkalus
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ICE Agents Have List of 20 Million People on Their iPhones Thanks to Palantir

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ICE Agents Have List of 20 Million People on Their iPhones Thanks to Palantir

Immigration and Customs Enforcement’s (ICE) use of Palantir systems now means agency officials effectively have a list of 20 million people readily accessible on their iPhones, increasing the speed at which ICE can find houses to raid and people to arrest, according to comments made by a senior ICE official last week during a border security conference.

While ICE and the Department of Homeland Security (DHS) generally won’t answer questions from journalists about how the agency is using Palantir’s technology, senior officials were much more talkative during the Border Security Expo which took place in Phoenix, Arizona, last week. 404 Media spoke to four people who attended the conference. Here companies looking to sell their technology to ICE or other agencies gathered for two days of speeches, Q&As, and product pitches.

💡
Do you work for Palantir or ICE? Did you used to? I would love to hear from you. Using a non-work device, you can message me securely on Signal at joseph.404 or send me an email at joseph@404media.co.
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Breaking Bread is an Artful Experience at This New Dallas Bakery

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Breaking Bread is an Artful Experience at This New Dallas Bakery

To savor a fresh baguette from a bakery in Paris is truly a feast for the senses, and often a highlight for foodies on holiday abroad. Few offerings stateside compare, though, with grab-and-go bakeries that all too often imitate the look of a standard French café, with little variation.

Refrigerated shelves in a store display bottled drinks, packaged foods, and jars. Adjacent open shelves hold more food items under signs reading "Market Selection" and "Favorites.

A bakery counter with pastries on display behind glass, shelves of packaged goods, and a tiled wall in a modern, minimalist interior.

The Bread Club in Dallas offers a different experience, with a contemporary take on traditional fare and favorite spots in the City of Light. Designed by INK+ ORO Creatives and inspired by the ritual of bringing loaves home from a Parisian market, it looks sophisticated without the contrived elements that would overwhelm the 1,120-square-foot eatery.

A bakery interior with shelves of assorted bread loaves and baguettes, and glass display cases filled with pastries and baked goods.

Bakery display with shelves of baguettes and round loaves, labeled “Fresh Daily Bread,” with a worker behind the counter and pastries in a glass case in the foreground.

Illuminated bakery signage displays the words "BAKED FRESH DAILY BREAD" above shelves stocked with loaves and packages of bread.

“The biggest challenge was reminding ourselves that we couldn’t turn the space into a French boulangerie,” says Tiffany Woodson, founder and CEO of the studio. “We kept coming back to strong architectural basics, trusting that restraint would do more to enhance the concept and showcase the product more than any decorative flourish could.”

Modern bakery café interior with marble counters, wooden shelves displaying pastries, sandwich and pastry signs, and tables and chairs by large windows letting in natural light.

Several baguettes are displayed upright on a wooden shelf, separated by dowels, with other loaves of bread visible on the left.

Modern bakery interior with tiled counters, display shelves filled with bread and pastries, and small tables with chairs by large windows letting in natural light.

The curved plaster ceiling adds a sense of volume, yet doesn’t seem heavy. It also serves as a marker that defines where customers line up, and highlights a main point of interaction, the counter. Delicate light boxes illuminate fresh goods, while shelving is accessible to both front-of-house staff and bakers that work in the rear. A coordinating vertical display stores the signature baguettes, and matching cases hold cold beverages and provisions.

A countertop with a potted plant sits beneath a menu listing signature drinks and prices on a cream-colored wall in a modern café.

A white La Marzocco espresso machine with stacked brown cups and clear glasses on top, situated on a countertop in a modern cafe setting.

The overall palette is neutral, but has just enough warmth, which forms a backdrop that will still align with the rest of the interior even as items on the menu or other facets change. Blue lettering on signage offers a hint of color. Luxe touches evoke the same softness as bread. Tiles with a subtle crackle finish complement the custom millwork. Walls with the same treatment used overhead provide a buttery texture throughout.

Modern coffee shop interior with a long marble counter, light wood furniture, coffee machines, and shelves with bread and pastries in the background.

Marble countertop with rounded edge on a tiled base featuring vertical rectangular tiles and brass trim, set on a textured floor.

The Bread Club blends the essence of Paris and its home base to reimagine what a bakery can be, no matter the location. “There’s a subtle nod to Texas wheat woven into the design’s sensibility, but it’s never literal,” Woodson notes. “It gives the space a timeless, unpretentious quality that feels welcoming to everyone.”

A bathroom with a marble-topped burgundy vanity, an irregularly shaped mirror, beige tiled walls, and a soap dispenser and small vase with flowers on the sink.

A sunlit cafe interior with wooden chairs and a marble table, featuring a glass vase with white flowers, near large floor-to-ceiling windows.

A sunlit café with wooden tables and chairs near large glass windows; each table has a small vase with white flowers. Outdoor seating is visible through the windows.

A sign reading "Pick up" with a logo is mounted on the exterior wooden wall of a modern building with large glass windows.

A bakery café with large windows, outdoor seating, and a bicycle with baskets of baguettes parked by the entrance.

Outdoor seating area with white tables and chairs near potted plants, next to a building with a sign reading "The Bread Club." A person sits at a table in the background.

Exterior of a bakery with striped awnings, a sign reading "The Bread Club," and a window displaying the word "Pastries.

A bakery called "The Bread Club" with striped awnings, outdoor seating, a bicycle with baskets, and large display windows under a cloudy sky.

To see this and other works by the design firm, visit inkandoro.com.

Photography by Aaron Dougherty.

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This Alarm Clock Coheres Past and Present in a Pithy Package

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This Alarm Clock Coheres Past and Present in a Pithy Package

Time is one of the hardest intangibles to fathom. It can feel both fleeting and unending; perceptively tied to specific places and conditions, yet also entirely untethered by context. With the advent of industrialization nearly four centuries ago—electric light “allowing” us to operate beyond the limitations of natural, seasonal rhythms—the perception of time itself accelerated.

A small, modern analog alarm clock sits on a wooden surface in a dimly lit room, with blurred foreground elements.

A silver analog alarm clock sits on a bedside table next to a bed with a white pillow and a wooden headboard in the background.

The best we, as humans, have done to formalize and comprehend this unceasing force is the invention of the clock. This ubiquitous, endlessly reinterpreted instrument was modeled on ancient sundials and, before that, the inherent patterns of Earth’s rotation. Like a compass helping us navigate longitude and latitude, the conventional mechanism clearly demarcates cyclical measures of passing time through swinging hands moving across radial dashes or uniformly depicted numbers. Until now, this predominantly visual convention has, for the most part, remained unchallenged.

A silver alarm clock sits on a bedside table next to a lamp, a woven tray with a small item, and an open book.

A suitcase lies open on the floor with neatly folded clothes, toiletries, and a small analog clock placed on top.

With innovative tech brand BALMUDA’s newly released The Clock, that changes. The small, handheld yet mighty device—cleverly hewn from a single block of aluminum and reflecting the form and feel of an old-school pocket watch—champions the new Light Hour system. With sequential dashes illuminated from behind in gentle gradients, there’s no need for additional apparatus or the aesthetically overloaded layering of hands. Rather than somewhat ominous, anxiety-inducing ticks, The Clock signals the passing of time through soft chimes and ambient soundscapes.

A person holds a small, white analog clock with a circular face and minimalist design, while sitting at a desk with books and papers.

A white analog clock sits on a wooden desk next to a stack of books, with a person writing in the foreground and a blurred green plant in the background.

With a growing desire to push beyond, rather than simply revert from, the mounting pressures ushered in by industrialization, this fresh paradigm better supports actual human cadences. It is designed to facilitate the needs of today’s more health-conscious consumer. Through the meticulous chronomatic sequencing of light and sound, The Clock offers Wake, Focus, and Relax functions. The first gradually fades in. The second introduces white noise to reduce distraction. The third emits rainfall, cathedral bell, and crackling firewood sounds to imbue its surroundings with calm.

A small square clock with a ring on top sits on a stone ledge next to a plaid jacket and sunglasses, with a blurred window in the background.

A hand holds a small clock over an open suitcase packed with a passport, books, a scarf, a brush, an eyeglass case, and other travel essentials.

“As an adult, sleep takes effort, and lately I found myself relying on rain sounds played from a tablet to help me relax before sleep,” says Gen Terao. “However, using a connected device in the bedroom never felt quite right. This led to a simple idea: to create a dedicated clock designed to support better sleep through sound and light. The Clock was developed as a focused, distraction-free tool to improve how we rest.”

A silver alarm clock sits on a wooden shelf surrounded by books, a framed picture, pens, and a lemon on a cloth.

With its lightweight, compact form, the device is inherently portable and capable of doing its thing almost anywhere, untethered by context.

Close-up of a BALMUDA clock displaying a minimalist circular face with numbers, a moon icon, and control buttons on the side.

A compact, rectangular metallic device with rounded edges, featuring a prominent circular dial and a button on its top surface.

A silver rectangular device with a central rotating knob, featuring a moon icon on the left button and a sun icon on the right button, against a plain light background.

Disassembled electronic device with its components, including wires, screws, circuit boards, and casing parts, arranged neatly on a white background.

A small black cube emits concentric circular waves outward on a dark background, suggesting sound or signal transmission.

To explore The Clock and other products by the brand, visit balmuda.com.

Photography provided by BALMUDA.

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The Nighttime Reveries of Textile Artist Adrienna Matzeg’s After Hours

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The Nighttime Reveries of Textile Artist Adrienna Matzeg’s After Hours

Adrienna Matzeg’s work often recalls bright summer afternoons, her vibrant table scapes conjuring a lunchtime setting at an alfresco cafe. But her latest series, After Hours, departs from her previous work completely. The punch needle pieces on black linen depict nighttime moments as conjured by memory. The collection, on view at Toronto’s Abbozzo Gallery, is Matzeg’s first physical solo show (she also exhibits her tapestries online). And it draws inspiration from her experiences on a trip to Jeju Island, South Korea and Kyoto, Japan.

Framed textile artwork depicting geometric roof shapes and a white lantern on a dark background, hanging on a white wall. Framed embroidery art of a blue and white taxi with a yellow sign on top, depicted driving on a dark background, hanging on a white wall.

It was so hot and humid during the days that Matzeg and her partner could only sightsee in the morning and at night. “I had this crazy vertigo the whole trip. So that’s what defined the night portion of this project,” she explains. “We did more at night because of how uncomfortable it was to go outside during the day.” The two had also purchased a new camera that allowed them to use a film-like setting. The result: dreamy images of cities at night.

A person in a white t-shirt and jeans sits on a stool in front of a wall displaying framed artworks, some depicting storefronts and signs.

When she got home, Matzeg also bought a colour printer; she printed out her photographs, cut them out and pinned them up. Images of a 7-Eleven facade lit up from within, a lantern glowing against a wall and – of course – a portable fan lying prone on an inscrutable surface are just some of the textile depictions she crafted from these images. One of the most evocative is of a taxi heading out into the night. “In Kyoto, the cabs are all these vintage crown comfort Toyotas, and they all have different little emblems on the top for the different companies — like a flower clover. They’re so precious.”

Framed embroidery artwork depicting a 7-Eleven convenience store and its sign against a black background, hung on a white wall.

Framed art piece showing an embroidered taiyaki pastry in paper and a plate of colorful dango skewers on a black background.

Matzeg sources her cotton threads in France and Japan. The black linen was completely new to her. “What the black linen does is take these scenes from a crazy, busy part of the city and everything else just falls away.” The objects and architectural structures sometimes seem to be floating against the backdrop — Matzeg likes to play with how she positions them on the canvas — the way that “memory comes to the surface, and everything else is just empty space around it,” she explains. “And I think that’s very special.”

Framed embroidery of a bar sign with a dragonfly emblem and the word "BAR" on a dark background, hanging on a white wall. Framed embroidery of a small building with a vending machine and a sign in Japanese characters, displayed against a plain white wall.

For Matzeg, nudging fibre art from the realm of hobby craft is a core consideration. “I intentionally try to elevate the medium in the way that I approach it — in the detail, in the colours that I choose, also how I think about it, which is more like painting.” She’s shaping her scenes by sculpting shapes and carving colours, rather than relying on line work. This means that her architectural themes are uncannily tangible, even if they also feel like flattened snapshots. She’s translating the chrome and plastic surfaces of a karaoke bar facade into thread; she’s blending her loops into smooth gradients. “I think about it more in terms of planes and materials,” Matzeg says.

Framed textile artwork depicting geometric roof shapes and a white lantern on a dark background, hanging on a white wall. A framed textile artwork depicts a hair dryer, crafted from thread in shades of beige and brown, mounted on a black fabric background.

At the After Hours show at Abbozzo Gallery, the works are installed in shou sugi ban frames (by Superframe) and mounted on an aubergine-painted wall. Together, they appear like a series of windows into vibrant remembered moments — the vivid hues and sharp forms of the scenes popping against their black backgrounds like vivid reliefs. Sometimes, they even gently wrap around the borders of the canvas, blurring the boundaries between object and frame. They’re on show to delight and inspire until May 30.

All photos courtesy Abbozzo Gallery.

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University Claims Withholding Water From Nuclear Weapons Data Center Is 'Unlawfully Discriminatory' to Data Centers

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University Claims Withholding Water From Nuclear Weapons Data Center Is 'Unlawfully Discriminatory' to Data Centers

The University of Michigan has sent a legal threat over a yearlong pause that would prevent water hookup to a proposed nuclear weapons research and AI data center. Los Alamos National Laboratory and the University of Michigan are looking to build a $1.2 billion, 220,000 square foot data center in Ypsitlanti Township. On April 22, the Ypsilanti Community Utility Authority (YCUA) passed a 365-day moratorium on the delivery of water to hyperscale data centers in the area while it conducted environmental sustainability and long-term water use studies.

As first reported by MLive, the University hand delivered and emailed a legal threat to the YCUA on April 21, the day before it was to vote on the proposed water moratorium. According to a copy of the letter obtained by 404 Media, the university feels the moratorium is “unlawfully discriminatory” against data centers and it promised to pursue “all rights and claims for relief” if its demands weren’t met.

Luther Blackburn, YCUA’s executive director, told 404 Media that the organization had no comment on potential or pending litigation, but did confirm that he’d received a legal communication from the university.  “YCUA staff are working on a Request for Proposal to complete the investigations and studies outlined in the moratorium,” he said. “I believe YCUA has acted lawfully and in accordance with industry best practices by issuing the moratorium.”

The university disagreed. “The University objects to any such sector-specific moratorium which would be legally invalid because, among other defects, it would be unrelated to any documented utility or public health needs,” the letter said, according to a copy obtained by 404 Media. “As a threshold matter, a moratorium on utility service is permissible only when linked to legitimate utility considerations such as documented capacity constraints, public health issues, or genuine financing challenges.”

The University argued, citing various legal precedents, that the courts will not be on Ypsilanti’s  side and claimed that the area has plenty of water. “The record contains no evidence supporting any such YCUA capacity constraint,” the letter said. “To the contrary, YCUA’s leadership has publicly stated that serving the University’s proposed facility would not affect the authority’s ability to provide or treat water.”

The letter quoted Blackburn as saying he had confirmed in 2025 that the data center’s proposed use of 200,000 gallons a day were within YCUA’s 8-10 million gallon per day capacity. “In addition, YCUA leadership has stated that serving the University's project would likely help mitigate overall utility costs by improving efficiency and cost distribution,” the letter said.

Sean Knapp, the YCUA’s director of service operations, told Planet Detroit last year that the YCUA is operating below capacity at the moment. “Adding the data center as a customer would help mitigate overall costs by improving efficiency and cost distribution,” he said at the time.

After saying it was illegal for the Ypsilanti community to not give it water, the University claimed the moratorium discriminated against data centers. “Beyond the above legal deficiencies, the proposed moratorium is pretextual and unlawfully discriminatory because it singles out ‘data centers’ by label rather than by utility impact,” the letter said. “It is discriminatory to permit other users to connect and consume currently available capacity while the utility conducts undefined studies to determine whether there is sufficient capacity for the University’s proposed facility.”

The University then asked the YCUA not to pass a moratorium and promised to “pursue” the matter. “The University respectfully requests that YCUA refuse to issue any sector-specific moratorium, instead basing any service decisions on documented utility factors, applied evenhandedly through existing permitting and technical review processes,” the letter said. “If these legal requirements are not followed by YCUA, the University reserves the right to pursue all rights and claims for necessary relief.”

The University of Michigan did not return 404 Media’s request for comment.

Ypsilanti Township has been fighting the proposed datacenter for more than a year now. Data centers are wildly unpopular in the United States. They often cause noise pollution, affect water quality, and drive up utility bills for their neighbors. Local opposition to the Ypsilanti Township data center has been compounded by its connection to America’s nuclear weapons industry.

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