AI debt binge faces steeper costs as Treasury yields hit 18-year high
This digest was compiled by AI from multiple sources — links to the originals are below.
Treasury yields climbed this week to their highest levels since 2007, pushing borrowing costs higher for debt-dependent AI infrastructure companies. JPMorgan Chase estimated in June that $4.1 trillion in AI-related debt will be issued through 2030. Even as CoreWeave shares rose almost 8% this week, Oracle fell 7% for the week and about 30% this year.
Key Facts
- The 10-year Treasury yield sits near 5.17%, up about 1 percentage point since the start of the year.
- JPMorgan Chase estimated in June that $4.1 trillion in AI-related debt will be issued through 2030.
- SoftBank raised $11.1 billion in a junk-bond sale this week, with yields as high as 9.75% for the 7-year tranche.
- CoreWeave shares rose almost 8% this week, while Oracle fell 7% for the week and about 30% this year.
Rising Borrowing Costs
With Treasury yields climbing this week to their highest levels since 2007, companies reliant on debt are poised to see their borrowing costs rise. The 10-year Treasury yield sits near 5.17%, up about 1 percentage point since the start of the year. Companies issuing debt are going to have to offer more attractive rates of return to lure investors.
AI Infrastructure Debt
JPMorgan Chase estimated in June that $4.1 trillion in AI-related debt will be issued through 2030. Data center companies and others tied to the artificial intelligence boom are racing to build up capacity to meet what many industry experts view as insatiable demand for AI services. Japan's SoftBank, a principal provider of capital for AI projects, raised $11.1 billion in a junk-bond sale this week, with yields as high as 9.75% for the 7-year tranche. Mark Malek, chief investment officer at Siebert Financial, said many of these companies need to be price insensitive to get as much capital as possible to compete.
Market Divergence
Shares of debt-heavy neocloud CoreWeave have held up fine, rising almost 8% this week. Oracle, which has counted on the debt market for its AI expansion, has had a tougher time, falling 7% for the week and about 30% this year. Leading model developers OpenAI and Anthropic are each valued at close to $1 trillion in the private market. Amazon, Google, Meta and Microsoft have committed to hundreds of billions of dollars this year in capital expenditures, with an expected increase coming in 2027. Those tech giants all have investment grade credit ratings, providing them with cheaper access to capital, while bigger challenges lie ahead for the rest of the pack.
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