Companies financing the expansion of artificial intelligence infrastructure are confronting increased borrowing costs as U.S. Treasury yields reached their highest levels since 2007 this week. The development has financial implications for data center operators and other technology firms that rely on debt to fund growth in a capital-intensive sector.
The 10-year Treasury yield, a benchmark for corporate borrowing rates, approached 5.17%, an increase of approximately one percentage point since the beginning of the year. In a June report, JPMorgan Chase estimated that companies in the AI sector would issue $4.1 trillion in related debt through 2030 to expand capacity.
Market responses to the changing financial conditions have varied among companies. The stock price for CoreWeave, a specialized cloud provider, rose nearly 8% this week. In contrast, Oracle, which uses debt markets to finance its AI expansion, saw its stock fall 7% during the same period.
This week, SoftBank, a major investor in technology projects, raised $11.1 billion in a high-yield bond sale, with some tranches offering yields as high as 9.75%, according to market data.
“They basically are price insensitive to that raise, which means they’re price takers,” said Mark Malek, chief investment officer at Siebert Financial. “In my view, a lot of these companies need to be price insensitive. They need to get as much capital as possible to compete.”
Some lenders and investors have noted a more selective approach to financing. Riley Thompson, a vice president at Mitsubishi HC Capital America, said lenders are becoming more discerning about which projects they will fund. “Instead of a roster of 50 neoclouds, there’s probably 20 that the market’s truly interested in,” Thompson stated in an interview.
In its latest quarterly filing with the Securities and Exchange Commission, CoreWeave disclosed that a one-percentage-point increase in interest rates could add $30 million to its interest expenses, based on its outstanding floating-rate debt as of June.
Oracle’s stock price declined following a Bloomberg report that the company issued a “force majeure” notice concerning its data center project in New Mexico. The report stated the notice was intended to protect the company from higher costs and could delay payments if the project is not online by its 2028 target. In a statement, Oracle said the project “remains on our planned schedule.”
Beyond rising interest rates, the AI industry is facing other considerations. A recent NBC News Decision Desk Poll found that 69% of respondents opposed the construction of data centers in their local communities. On Monday, Texas Gov. Greg Abbott ordered a temporary halt to environmental permits for data centers in the state.
Despite these factors, some financial analysts report that demand for AI services and the associated infrastructure continues to motivate investment. Andrew Giudici, global head of corporate, project, and infrastructure finance at credit rating agency KBRA, said he does not anticipate a significant decline in borrower demand.
“In a normal environment, people might take a step back and pause a bit,” Giudici said. “But I don’t think that’s going to happen here. I think you’re going to continue to see relatively large issuance.”
Haim Zaltzman, vice chair of Latham & Watkins’ emerging companies and growth practice, noted that while costs are rising, the demand structure makes it easier for companies to manage them.
Bernie Margulies, CEO of American Compute, a risk management advisory firm, said companies with contracts to provide computing capacity to major AI developers like OpenAI and Anthropic are proceeding with financing plans.
“If you have a deal with Anthropic, will 50 basis points really stop you?” Margulies said.
