AI Compute Glut May Lower Costs, Boost Crypto and Bitcoin

Arthur Hayes, co-founder of BitMEX, believes that the current 'Safety First' pause on AI development is less about concern for humanity and more about weak demand for AI products at current prices.

In a recent essay, Hayes pointed out that the compute demands of three leading labs, Anthropic, OpenAI, and SpaceX, back over $1 trillion in investment-grade debt and hundreds of billions in lower-quality loans. This financing flows through partners like Nvidia, Broadcom, Google, and Microsoft.

Hayes argues that if training spending falls under the 'Safety First' banner, compute purchases will drop while the debt will stay on the books, effectively creating a compute glut that could make AI cheaper to run.

This dynamic is favorable for Hayes' own AI-crypto venture, the Flop Network, and for Bitcoin. He also believes that the resulting decrease in AI data center debt would force parent insurers to find capital that reinsurers cannot supply, potentially leading to another 2008-style rescue by the US government.

However, whatever the government does, Hayes predicts that Bitcoin and crypto investors will win due to increased money printing. He notes that the current situation is similar to his previous argument on September 3, when he pointed out funding stress at French banks like BNP Paribas and Societe Generale as a trigger for renewed Fed money printing through its repo facilities.