Rothschild & Co Redburn flag AI financing risks — MarketWatch
Analysts at Rothschild & Co Redburn have warned of risks in the artificial intelligence computing infrastructure segment, where specialized cloud providers lease chips and computing capacity to developers and operators of AI models. As MarketWatch reports, analyst Alex Heissl believes financing for this area is becoming increasingly risky.
High contract prices
According to Heissl's estimate, due to infrastructure constraints, buyers of computing capacity pay more than $20 billion per gigawatt per year on average. He believes these prices may be artificially inflated by well-funded AI startups, which the analyst calls neolabs.
Such companies raise funds from venture investors or major technology corporations and enter into computing-capacity contracts at prices that, according to Heissl, substantially exceed levels justified by broader market conditions. The analyst assigned a “sell” rating to shares of Nebius, CoreWeave, and Oracle, pointing to downside potential in the computing services segment.
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More expensive debt financing
In Heissl's view, credit markets are already pricing in the structural vulnerability of the AI trade, while equity investors are focused on strong demand for chips and servers. He also noted that the free cash flow of Amazon, Microsoft, and Alphabet has declined due to significant AI spending, leading these companies to raise debt.
According to the analyst's estimate, the actual level of debt burden may be higher than the figures reported in financial statements, as traditional metrics do not cover off-balance-sheet infrastructure obligations under leases and financial guarantees to smaller market participants. Amazon, Microsoft, Meta, and Oracle collectively have more than $1 trillion in future lease obligations, according to his data.
Heissl also pointed to the higher cost of financing for CoreWeave and Nebius. In August 2026, Nebius raised $5.75 billion in convertible debt; as the debt maturity was extended from 2030 to 2034, its effective interest rate rose significantly. The financing cost of CoreWeave's March debt deal linked to a contract with Meta was about 5.9%, while the August deal cost around 9%. Heissl also noted that higher interest rates could further increase these companies' financing expenses.
