Lenders and investors are getting choosier about their bets and demanding stricter terms, as the AI build-out enters a new phase.
The rush to fund data centers, chips and model training that powered the first wave of the artificial-intelligence boom is colliding with higher interest rates and tighter credit conditions. Banks and private lenders are re-pricing risk, requiring more equity from sponsors and pushing floating-rate debt deeper into the cost structure of deals.
Venture capital and private-equity shops that once piled into AI startups at eye-popping valuations now find exit options limited and fundraising more expensive. The combination of elevated financing costs and uncertain returns is forcing companies to extend runways, slow hiring and in some cases shelve expansion plans until markets stabilize.
Analysts say the funding squeeze could accelerate consolidation, with larger technology groups and well-capitalized investors gaining an advantage over smaller players that can no longer rely on cheap, abundant capital.
The shift marks a turning point: the era of generous AI funding may be ending, replaced by a more disciplined market where only the best-backed projects survive.
Source: Wall Street Journal Markets · Summarized by HeadlinesBriefing