Trillions in borrowed money have fueled the A. I. boom, but growing uncertainty now threatens the sector’s financial stability. Core Weave, a data center company with $72 billion in liabilities, saw its bond prices crash and investors assign a 60%+ probability of default.
Similar sell-offs hit Oracle and Soft Bank, while credit default swap prices surged. The spread on risky A. I. debt has jumped over 50% in six months, per Barclays. “The market is on a knife’s edge,” says Alexandra Coleman of Azraq.
While hyperscalers like Meta and Alphabet face only modestly higher borrowing costs, smaller players like Core Weave are under severe strain. Its stock fell 24%, and bond yields exceeded 15%, signaling deep distress. Analysts compare its model to WeWork’s — leasing infrastructure to sublease to clients like Meta and Microsoft.
David Munves of AIR Platforms notes a “collective realization” that A. I. revenue may not match current debt commitments. The Fed’s rate hikes, partly driven by data center inflation, add pressure.
The broader question: are these firms weak links or harbingers of a wider A. I. debt crisis?.
Source: New York Times Business · Summarized by HeadlinesBriefing