Investors are losing confidence that revenues from the AI boom will be enough to support the vast debt piles financing data centres, pushing bonds backing some of the largest US infrastructure projects into stressed territory. Prices of bonds issued for prominent data centres where Meta, Nvidia, Oracle and others will be tenants, such as "Hyperion" and "Project Excalibur", have fallen well below par in recent weeks.
The Blue Owl and Meta-backed special purpose vehicle Beignet Investor, which funds the Hyperion project, has seen its debt slip from above par in early July to a little under 92 cents on the dollar. Bonds for the Blackstone-owned QTS data centre in Georgia, leased to Microsoft, have slipped below 88 cents. Neocloud providers have been hit harder still. Bonds issued by Core Weave have sunk as low as 75 cents on the dollar, a level typically considered distressed, pushing yields above 15 per cent on Thursday. The company's shares are down 22 per cent this week, while rival Nebius has lost 20 per cent.
The sell-off follows OpenAI's decision to delay its initial public offering until next year and a slowdown in Anthropic's quarterly sales growth. Analysts point to a multitrillion-dollar gap between infrastructure spending and the revenues needed to finance it. Ludovic Subran, chief investment officer at Allianz, said data centre bonds are having their "Darwin moment", where the weakest credits struggle to survive. Nvidia has shed more than $300bn in market value over the past week.
A Gartner report predicted that 80 per cent of neoclouds would cease independent operations by 2030. The firm said AI data centre owners would need to generate $8.5tn in revenues by the end of 2030 to cover costs, but forecast spending on AI services would reach no more than $3.6tn. Meanwhile, a political backlash over water, noise and air pollution has led states including New York and Texas to impose strict restrictions on new data centre proposals.
Source: Financial Times Companies · Summarized by HeadlinesBriefing