AI Debt Warning Signs Are Piling Up: Why Bond Markets Are Getting Nervous About AI Infrastructure Spending
The artificial intelligence (AI) boom has a bit of a problem: someone has to pay for it. Despite soaring sales, the costs are still far ahead of the revenues, and more and more companies are turning to the debt market to fund the gap and continue the AI build-out.
But as companies borrow more to build their data centers and fill them with advanced chips, investors are getting nervous about when they’ll see a return — or if they will. This week, that fear has shown up in the bond market where yields are spiking, and the cost to insure the debt against default has reached record levels for companies like CoreWeave and Oracle.
The turbulence was rough enough for Nvidia CEO Jensen Huang to step in to try to reassure investors, telling investors that CoreWeave’s “financial strength is improving every day.” Despite his insistence, the company’s bond prices have plummeted; some were trading around 80% of face value, firmly in “distressed” territory. Rates are spiking too, with its October 2031 bond yield reaching 16%.
Source: www.fool.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.