This week's interesting finds

A few charts worth discussing

“CCC-rated loan spreads are now at their widest level outside of the financial crisis, oil going to $8 in 2016, and the COVID-19 pandemic...while high yield spreads trade at all-time tights. There i’s a credit crisis brewing and nobody knows.”

- Derek Skomorowski

“EU bank deposits as a percentage of household assets are well above the global average at over 30%.”

- Claire Thornhill

Other charts worth pointing out

S&P 500 Index market cap weight, by sector

Affiliated investments by private capital-backed insurers

Software vs. S&P 500 index – performance comparison

Canada & the U.S. – home prices vs. incomes

Job postings – software engineers vs. total

U.S. new business applications

S&P 500 Index performance – 10 largest stocks vs. the next 40

Tech groups turn to more chip-backed loans to fund AI arms race

Tech companies are increasingly turning to loans backed by the chips on which their large language models are trained as they hunt for ways to fund their massive AI investments.

Such loans, which are secured against graphics processing units and backed by leases to the tech groups, are popular with a sector burning hundreds of billions of dollars a year in an AI arms race on chips that can quickly become obsolete.

Investors have been attracted by yields in the high single digits to mid-teens, which are typically higher than those on debt issued by the tech companies themselves.

Pioneered by cloud computing provider CoreWeave in late 2023, GPU-backed debt has grown in popularity as demand for advanced chips skyrockets and prices soar. Citigroup estimates that GPUs and associated servers can account for 30 to 40 per cent of total project costs for data centres.

The loans are typically taken out by special-purpose vehicles formed by tech companies and investment firms for the purpose of acquiring a cache of high-performing chips, which would then be leased to the tech businesses to train their AI models.

This arrangement allows Big Tech groups, whose use of debt markets is growing rapidly, to shift the loans off their corporate balance sheets.

Last month, Apollo announced a $3.5bn financing package for a digital infrastructure fund managed by Valor Equity Partners, which would buy Nvidia’s GB200 hardware, known as AI superchips, and lease them to Elon Musk’s xAI.

IREN Limited, an AI cloud service provider, also secured $3.6bn in loan commitments from Goldman Sachs and JPMorgan earlier this month to buy chips for its AI contracts with Microsoft.

Lenders often have to act fast and write big cheques in these transactions, according to a lawyer familiar with GPU financing.

The rising popularity of such loans highlights investors’ clamour for asset-backed finance, where banks and private credit funds seek esoteric debt secured by stable cash flows.

Deals usually come with “hell or high water” clauses that prevent tech companies from terminating the leases early, helping mitigate the risk that these GPUs become obsolete as AI technology quickly evolves.

Moody’s, which has begun to rate GPU-backed debt, said it withdrew credit ratings once underlying leases came to an end.

Nevertheless, some investors remain concerned that the economic life of GPUs could end up being shorter than expected, while the market value of older AI chips is often questionable due to a lack of price history in the nascent industry. Current valuations could also be inflated by short-term chip supply shortages, investors said.

This week’s fun finds

This week, Vishnu from the Technology Team, hosted the most anticipated moai at EdgePoint. It delivered both comfort and flavour that  exceeded the hype.

A total lunar eclipse will shine over Canada! Here’s how to watch from anywhere

Check your weather forecast for clear skies in the hours between midnight and sunrise next Tuesday, for a chance to see the last total lunar eclipse until the end of 2028!

On Tuesday, March 3, the Full Moon will pass directly through Earth's umbral shadow, resulting in a total lunar eclipse.

This week's interesting finds

Cymbria's 18th annual investor day

This year's Cymbria Day will take place both in-person and virtually on Wednesday, May 13th. Registration is now available. Click here to learn more.

A few charts worth discussing

“Global GDP growth is exceptionally feeble, not only from year-to-year but also decade-to-decade. Investors should focus on identifying positive change at the company level, from the bottom up, while maintaining a margin of safety in their portfolio, given that the macro-outlook appears dismal.”

- Stas Lopata

“The growing capital intensity of the hyperscaler data centre buildout is showing up in higher levels of debt issuance.”

- Jason Liu

“Retail traders are becoming an increasingly important player in U.S. markets, making up over 20% of total U.S. trading volume from 10% in 2010. Long only and hedge funds' share have fallen from 23% to 15% over the same period.”

- Claire Thornhill

Other charts worth pointing out

AI disruption risk concerns by theme & industry

Equity market correlations - Cyclicals/Defensives

% of FMS investors who believe companies are spending too much on capex

Average cash levels still near historic lows

Small-cap vs. large-cap performance expectations

Software stock performance and valuation levels

Greater Toronto Area new condo sales

Blue Owl permanently halts redemptions at private credit fund aimed at retail investors

Private credit group Blue Owl will permanently restrict investors from withdrawing their cash from its inaugural private retail debt fund, backtracking from an earlier plan to reopen to redemptions this quarter.

The New York investment group on Wednesday said investors in Blue Owl Capital Corp II would no longer be able to redeem their investments in quarterly intervals but that the company would instead return investors’ capital in episodic payments as it sells down assets in coming quarters and years.

The decision underlines the risks facing retail investors, who have ploughed hundreds of billions of dollars into funds with limited liquidity rights.

Blue Owl’s announcement came as part of a $1.4bn sale of credit assets across three of its funds, including $600mn for its retail credit fund. The sale amounts to 30 per cent of its total assets, which will be distributed to investors.

Blue Owl Capital Corp II, also known as OBDC II, has been closed to redemptions since November after it abandoned efforts to merge it with a larger publicly traded credit fund managed by Blue Owl. 

That deal drew scrutiny after an FT report showed investors in OBDC II would face a 20 per cent hit based on the acquiring fund’s trading price at the time. Blue Owl called off the fund merger days later. 

Because OBDC II is not publicly traded it had instead offered investors the ability to redeem cash every quarter at the fund’s stated value, generally up to 5 per cent of net assets.

Blue Owl’s abandoned fund merger came as redemptions climbed in 2025 to a level where it would eventually have been forced to restrict investor withdrawals.

Investors in OBDC II pulled $150mn from the fund through the first nine months of 2025, a 20 per cent increase from the prior year, according to securities filings. Redemptions in the third quarter of 2025 nearly doubled to $60mn, or 6 per cent of its net asset value.

The company said it had also agreed to $800mn worth of loan sales from two other funds, including its non-traded technology-focused fund Blue Owl Technology Income Corp and its listed $16.5bn vehicle Blue Owl Capital Corporation, known by the ticker OBDC.

It said pension funds and insurance companies would buy the loans at an average of 99.8 per cent of their carrying value using new vehicles to be managed by Blue Owl.

Wednesday’s deal comes amid heightened scrutiny into the quality of private credit loans after a number of high-profile defaults and rising fears over the exposures portfolios have to software companies vulnerable to AI disruption.

Blue Owl characterised the asset sale as a validation of the quality of its portfolio and pointed to the prices it was able to secure in the sale. The company said its funds would maintain significant stakes in the loans after the $1.4bn worth of sales are completed.

This week’s fun finds

Journey Through Autumn and Winter in Robinsson Cravents’ Hand-Drawn ‘Yosemite’

Even though most of us are eager for spring here in the Northern Hemisphere, we’re happy to linger in winter a little while longer to take in Robinsson Cravents’ new project. The Colombia-based designer and illustrator recently released a pair of hand-drawn digital landscapes that take a bird’s-eye view of Yosemite National Park. Starting with a wide aerial shot of coniferous trees, the films then journey down a stream up to a waterfall, capturing the majestic scenery with grainy, tactile detail.

The project is a commission for Yosemite, a venture capital firm helmed by Reed Jobs that funds startups and researchers working on cancer treatments. For the creative direction, Cravents collaborated with LoveFrom, a collective helmed by Apple alum Jony Ive.

This week's interesting finds

A few charts worth discussing

“Big beat in the U.S. payroll numbers…

…but looking under the hood, it’s almost entirely from Healthcare and Social Services”

- Greg Sinclair

“The EU is trying to get its citizens to move more household savings from cash/bank deposits to the European equity markets, encouraging the use of TFSA-style accounts by EU households. It has a long way to go.”

- Claire Thornhill

Other charts worth pointing out

U.S. dollar since 1967

Tradable debt outstanding by region

Emerging market equity and debt ownership

Emerging markets vs. U.S. equities

U.S. large-cap growth vs. U.S. small-cap value

Historical 10-year U.S. Treasury yields

Capex-to-Sales ratio across developed markets – by sector

Total return performance by asset class – 2009 to 2020

Total return performance by asset class – 2025 to today

Annual asset class performance – 2007 to 2026 (YTD)

Private Credit’s Software Bet Is Even Bigger Than It Appears

A quick scan of Pricefx’s website leaves little doubt how the company sees itself. “The #1 Leading Pricing Software” is splashed across its homepage. As is “Great Pricing Software Makes Dreams Reality.” In all, “software” appears more than a dozen times on that first screen alone.

One of Pricefx’s biggest financial backers prefers a different label, though. Sixth Street Partners, a top direct lender to the firm, classifies Pricefx not as software but as a “business services” company.

And so it goes in the world of private credit. Time and again, companies widely regarded as software firms are frequently labeled otherwise by lenders, a practice that raises fresh questions over the full extent of their exposure as the threat from artificial intelligence upends markets and rattles investors. Bloomberg News reviewed thousands of holdings across seven major business development companies — funds that pool direct loans — and found wide variation in how investments tied to the sector are categorized.

At least 250 investments, worth more than $9 billion, weren’t labeled as loans to software firms by one or more of the BDCs, even though the companies borrowing the cash are described that way by other lenders, their private equity sponsors, or the firms themselves. The discrepancies, market watchers say, underscore broader concerns about private credit, a famously opaque industry marked by inconsistent reporting standards, complex fee structures and significant discretion over valuation practices.

‘More Responsibility’

While questions over how companies are categorized aren’t unique to private credit, the issue takes on added weight in a market already known for its limited transparency.

Because these loans are privately negotiated and thinly traded, there’s little independent price discovery or commonly referenced benchmarks to fall back on. The labels managers assign can therefore carry outsized importance, shaping how investors gauge sector exposure, concentration risk and vulnerability to shifts such as the rapid advance of AI.

Drawn by predictable revenue streams, alternative asset managers piled into software for more than a decade. Industry executives have been forced to address investors’ questions about this concentration on recent earnings calls. Apollo President Jim Zelter.

Blurry Lines

Angst about the future of the software business has escalated rapidly — and hit the stock and credit markets hard — after the AI startup Anthropic PBC released a series of new tools that threaten everything from financial research to real estate services. The S&P North American software index has posted daily declines of more than 4% three times in the past few weeks, and is down more than 20% this year.

What even qualifies as “software” isn’t always clear-cut.

Apollo, for example, categorizes Kaseya, a self-described “IT management software” company, as “specialty retail” in filings. Other lenders, including Blackstone and Golub, place it in the software bucket.

Restaurant365, which calls itself a “back-office restaurant system software” provider, is labeled as “food products” by Golub. That puts it alongside companies such as Louisiana Fish Fry and the maker of Bazooka Bubble Gum. Ares groups the company with its software and services holdings instead.

Some say private credit managers may face increasing scrutiny over how they define and disclose their holdings as AI reshapes the software industry.

This week’s fun finds

Howard, from the Business Development Team, brought a little luck and a lot of flavour by hosting this year’s Lunar New Year moai. No better way to kick off the long weekend than celebrating with great partners.

From a whiff of mystique to witty love: over 200 years of Valentine’s cards

In the late 19th century, few things telegraphed yearning like a card adorned with paper lace, gold foil and a couple exchanging a coy glance.

Today, such a card would evoke an eye roll.

The evolution of cards from the treacly confections of Victorian England to the quippy missives of today reflect both shifting design aesthetics and broader cultural customs around romance. As the borders of socially accepted relationships have shifted, so have the cards. Where once there was poetry, now there are drawings of pizzas.

“Greeting cards are a reflection of society,” said Carlos Llansó, executive director of the Greeting Card Association, a trade organization that represents roughly 4,000 independent card makers.

Valentine’s Day cards today are less formal, precious and prescribed, Mr. Llansó said, because our understanding of love has become more expansive.

This week's interesting finds

A few charts worth discussing

“While Toronto home prices have corrected, they remain elevated relative to median after-tax household income.”

 - Jeff Hyrich

“For the first time since 2021, the momentum factor is being increasingly driven by value stocks.” 

- Frank Mullen

“On average, DBRS credit ratings are one notch higher than S&Ps, Moody’s and Fitch. When Canadian firms go with a single bond rating, 80% go with DBRS”

- Steven Lo

Other charts worth pointing out

Software vs. semiconductor stocks

Crypto fund inflows

Tech fund inflows

U.S. vs. global equities – performance

MSCI U.S. vs. MSCI World ex. U.S. – equity valuations and price levels

U.S. tech capex

Emerging markets vs. developed markets

High yield software/tech credit spreads:

Chinese exports to U.S.

Banks seek out new buyers for Oracle data centre loans

At least $56bn worth of data centre construction loans — supported by the software company’s future leases as part of its $300bn deal with OpenAI — have been given investment-grade ratings, according to people familiar with the deals. These ratings, which are relatively rare for infrastructure construction loans, have allowed banks to attract a much broader base of investors than usual for project finance debt.

While banks have mostly tended to fund project finance loans for the construction of toll roads and airports themselves, the massive deal sizes of recent data centre projects have overwhelmed this source of demand, leaving tech giants keen to find new sources of capital.

The attempts to find buyers for the debt come amid a rapid increase in debt issuance by Big Tech companies, with half of the 10 largest borrowers in the US investment-grade bond market set to be so-called hyperscalers by 2030.

Investor concerns have been growing about Oracle’s aggressive commitment to AI spending, as it bids to compete with rival tech groups, and its debt pile. The software company on Monday separately raised another $25bn in the bond market after pledging to preserve its investment-grade rating by keeping its debt load in check, while it also reassured debt investors with plans to issue new equity.

The ratings on the data centre loans cover Oracle’s leases on $38bn of data centre facilities being built in Texas and Wisconsin, as well as an $18bn data centre campus in New Mexico, which is backed by Blue Owl Capital, according to people familiar with the efforts. Both loans are being marketed to investors.

More than a dozen banks have lent against Oracle’s long-term lease commitment in both transactions, which were priced at 2.5 percentage points above the Secured Overnight Financing Rate (SOFR), the people said.

Borrowing costs for newer Oracle-linked data centre projects have widened to 3 to 4.5 percentage points above SOFR — levels that are closer to junk-rated debt — according to a research note by TD Cowen published on January 26, based on pricing of debt that has not yet been sold on to investors.

Some investors are hesitating about whether to purchase the two Oracle-backed syndicated loans currently in the market in anticipation of higher returns in future.

A second investor who has purchased other bonds backed by data centre projects said banks were nervous about their increasing exposure to the AI financing boom and were seeking ways to offload the debt they had agreed to provide.

To do so, they had had to offer investors higher interest rates on these deals than expected, the person added.

STACK Infrastructure, which is responsible for the data centre development in New Mexico, confirmed that the transactions were currently in the syndication phase and had received investment-grade credit ratings.

“STACK views the syndication as progressing as expected and with expected market terms,” it said. 

Oracle said the financing for the two data centre projects was “secured at market standard rates, progressing through final syndication on schedule, and consistent with investment grade deals”.

This week’s fun finds

Shoutout to interns, Calista and Rhea for putting together an awesome Superbowl-themed Moai. It was a perfect halftime get together for a Friday. Thanks for making us all game-day ready.

The 26 Best Super Bowl Ads of the Past 26 Years

Every year, advertisers spend millions for 30 seconds of Super Bowl glory. The best ones become cultural moments that outlive the game itself.

Ahead of Super Bowl 2026, ADWEEK revisits the 26 commercials of the past 26 years that proved worthy of the hype.