Rising US bond yields could make AI infrastructure more expensive — CNBC
In the United States, rising government bond yields could increase borrowing costs for companies financing the construction of artificial intelligence infrastructure. The yield on 10-year US Treasury bonds approached 5.17%, about one percentage point higher than at the start of the year, CNBC Top News reports.
In June, JPMorgan Chase estimated that $4.1 trillion in AI-related debt obligations could be issued by 2030. Data center operators and other AI market participants are expanding capacity to meet demand for related services.
More expensive financing
Higher government bond yields mean that corporate borrowers will have to offer investors more attractive returns. Japan's SoftBank raised $11.1 billion this week through the sale of high-yield bonds, with the yield on the seven-year tranche reaching 9.75%.
CoreWeave, which actively uses debt financing, said in its quarterly report that a 100-basis-point increase in interest rates could raise its interest expenses by about $30 million, given the amount of outstanding floating-rate debt. CoreWeave shares rose nearly 8% over the week, while Oracle shares fell 7% during the week and about 30% since the start of the year.
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Lender selectivity
Riley Thompson, vice president of Mitsubishi HC Capital America, said lenders are becoming increasingly selective about financing deals in the neocloud segment, even if borrowers are willing to pay a higher rate. According to him, the market is genuinely interested in about 20 such companies, rather than 50.
Oracle shares declined after Bloomberg reported on Oracle's force majeure notice related to the Project Jupiter data center project in New Mexico. Bloomberg wrote that Oracle seeks to defer payment for the campus if it does not become operational as expected in 2028. Oracle said the project remains on schedule.
At the same time, major technology companies Amazon, Google, Meta and Microsoft have investment-grade credit ratings, giving them cheaper access to capital. Andrew Giudici, a representative of rating agency KBRA, believes that higher rates may affect future deals but does not expect a significant reduction in demand for borrowing for AI infrastructure.
