// HACKER NEWS — CYBERSECURITY
The Teaser Period: Why the AI Boom Is Hitting a Reset Wall
Nothing looked wrong in the summer of 2006. Home prices had risen for the better part of a decade. Delinquencies were near historic lows. Credit spreads were tight, the ratings held, and the securitization machine hummed. If you had asked a hundred people on a trading desk whether the American mortgage market was months from seizing, most would have laughed.
Millions of subprime borrowers were, at that moment, paying the low introductory rate on a two-year adjustable rate mortgage - the 2/28 ARM. A low fixed-rate for two years, then the rate reset to a payment 30% to 50% higher. During those first two years the loan performed beautifully: the borrower paid, the servicer collected, and the bond paid its coupon. Nothing looked wrong because the whole complex - housing, mortgages, securitization - was sitting inside the teaser period.
Every ARM reset was known, dated, and contractually inevitable from the moment of origination. Aggregate those reset schedules and you get the most damning exhibit of the era: the reset wall. Roughly a trillion dollars of adjustable-rate mortgages were contractually set to reset across 2007 and 2008 - thirty to forty billion dollars a month at the peak. Credit Suisse published the chart in March 2007. The IMF reprinted it. It circulated on every trading floor in New York and London.
Few understood it. Paulson & Co. laid out the arithmetic that same month in a comment letter to the FDIC: Over 80% of recent subprime originations, it observed, were two- or three-year adjustable-rate products. The average subprime borrower’s mortgage payments already consumed roughly 40% of their gross income at the teaser rate. Almost none of them could service the reset rate out of income.
The crisis, in other words, was written in advance by the instruments themselves. The market looked at the reset wall and kept buying, because every participant believed the exit would arrive before the reset: home prices would keep appreciating and the borrower would refinance into a fresh teaser before the old one expired.
We have spent the last eighteen years describing the financial crisis as a shock - a black swan, a hundred-year flood, a tail event. It was none of those things. Every reset on that chart was contractually inevitable from the moment of origination. The defaults were not primarily caused by an exogenous macro shock, a spike in unemployment, or a recession that arrived first. They were the scheduled mathematical consequence of loans that assumed perpetual appreciation. The mortgages were built to break.
The AI boom has rebuilt this exact structure, and the market is once again underwriting the teaser.
It has a reset wall of its own - a schedule of dated, contractual, non-negotiable payment shocks - hiding inside the trillions of dollars of compute contracts signed by OpenAI and other frontier labs since 2024.
The take-or-pay compute contract - the instrument at the center of the AI build-out - has a structural feature that almost no one prices: its payments do not begin at signing. They begin at delivery. A lab signs a multi-year capacity commitment today, but the payments do not start until the data center is energized, the capacity is accepted, and the contractual ramp schedule commences - an interval set not by finance, but by construction: siting, powering, and filling a gigawatt-scale campus takes 24-to-36 months from signature - mirroring the two-to-three-year teaser of a subprime ARM.
More than $2.3 trillion of compute contracts now sit on the books of the four largest American cloud providers as remaining performance obligations and contracted backlog - signed, celebrated, capitalized into equity prices, and, critically, not yet billing.