Key facts
- High borrowing costs are scrutinizing the financing behind AI infrastructure.
- Investors are worried about a potential debt crisis among highly leveraged tech companies.
- Concerns exist about the speed, efficacy, and profitability of the AI buildout.
- Higher borrowing costs may cut into future returns for AI infrastructure projects.
- The market is questioning the sustainability and trajectory of demand for computing capacity.
US technology stocks and their bonds intensified their selloff on Thursday as high borrowing costs put the financing behind AI’s massive infrastructure buildout under growing scrutiny. Coreweave’s bonds have sunk to distressed levels, US chipmakers have shed nearly $2 trillion in market value since last week, and AI fundraising has slowed, driving investors toward the safety of Treasuries despite a second straight day of hotter-than-expected inflation data. Analysts expressed concerns about the rapid buildout in AI, questioning its speed, efficacy, and profitability. Some believe that if the pace of data-center construction slows, hardware companies could see reduced spending. Others view the situation as a rates event in credit, with Coreweave being a highly leveraged expression of it rather than evidence of cracking AI demand. Concerns were also raised about the extraordinary amounts of debt being taken on for AI infrastructure, with higher borrowing costs potentially cutting into future returns. There is also a worry of overspending on capacity that may never be used. Investors are showing caution towards the more vulnerable segments of the AI ecosystem, with some tech leaders advocating for a slower pace of frontier model development.