Orlando Bravo: AI buildout is very dependent on rates and stocks to fuel it

Summary

Orlando Bravo discusses the impact of higher interest rates, the US fiscal deficit, and AI-driven productivity on markets. He argues 5% rates will not kill software because company owners can cut costs or grow earnings through innovation. He sees the AI buildout as critical to productivity-led growth, though it depends on rates and stock-market levels. He also warns that AI-related income is not yet enough to offset rising input costs.

• Host raises bond yields near 5% and the Treasury buyback operation.
• Bravo says Thoma Bravo refinanced $20B of debt at spreads 150-200 bps wider but software will adapt.
• US deficit is near $2T and expected to rise toward 7% of GDP.
• He describes a doom loop where stronger growth raises bond yields and widens the deficit.
• He believes productivity growth via the AI buildout is the key, not wage growth or inflation.
• AI buildout is very dependent on rates and stock market levels for continued funding.
• He says AI construction income is not enough to offset higher rates, gas, insurance and healthcare costs.
• Software pricing power is limited and customers can defer projects.