Treasury yields climbed this week to their highest levels since 2007. That means companies that rely on borrowed money will likely pay more to raise funds, including those building AI infrastructure.
The 10-year Treasury yield now sits near 5.17%. That is 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. Data center companies and others tied to AI are racing to build capacity to meet demand for AI services.
How AI Stocks Reacted
The market has not panicked so far. Shares of CoreWeave, a debt-heavy cloud computing company, rose almost 8% this week.
Oracle had a tougher week. The company, which has relied on the debt market for its AI expansion, saw its stock fall 7% for the week and about 30% this year.
Oracle shares slid after a Bloomberg report said the company sent a "force majeure" notice tied to its New Mexico data center, called Project Jupiter. The report said Oracle wants to delay payment if the campus does not open as expected in 2028. Oracle said the project "remains on our planned schedule."
In Japan, SoftBank raised $11.1 billion in a junk-bond sale this week. Yields reached as high as 9.75% for the 7-year portion of the deal.
"They basically are price insensitive to that raise, which means they're price takers," said Mark Malek, chief investment officer at Siebert Financial.
Lenders Grow More Selective
Amazon, Google, Meta and Microsoft have committed hundreds of billions of dollars to spending this year, with more expected in 2027. These companies all have investment grade credit ratings, which gives them cheaper access to capital.
Smaller companies may face bigger challenges. A senior private credit investor told CNBC that neocloud deals will be harder to finance because those companies have less cushion to absorb higher costs.
Riley Thompson, a vice president at Mitsubishi HC Capital America, said lenders are getting pickier even when borrowers agree to pay higher rates. "Instead of a roster of 50 neoclouds, there's probably 20 that the market's truly interested in," Thompson said.
CoreWeave warns about rising rates in its SEC filings. The company said every 1 percentage point increase in rates could add $30 million to its interest expense, based on its floating rate debt as of June.
Other issues are also in play. Before this week's jump in yields, the CEOs of OpenAI and Anthropic had urged a slowdown in AI development after researchers raised concerns about advanced models.
A recent NBC News Decision Desk Poll found 69% of respondents oppose building AI data centers in their local area. On Monday, Texas Gov. Greg Abbott ordered a temporary halt to all data center-related environmental permits.
Demand for AI services remains strong. Meta's Muse assistant app passed 2.5 million global downloads in its first two weeks and topped ChatGPT on Apple's App Store.
Bernie Margulies, CEO of American Compute, said borrowers are eager to secure financing, especially those with contracts from OpenAI and Anthropic. "If you have a deal with Anthropic, will 50 basis points really stop you?" Margulies said.
