AI Infrastructure Boom Faces Debt Reality Check Amid Growing Investor Concerns

Investors are questioning if artificial intelligence revenues will justify the massive debt financing the industry's infrastructure boom. Bonds linked to major data centre projects have slid, and borrowing costs have risen amid concerns over construction delays, rising financing costs, and uncertain returns.

The sell-off has impacted Nvidia-backed CoreWeave alongside projects backed by Meta and Oracle. CoreWeave bonds have fallen below 80 cents on the dollar, pushing yields close to 15%. CoreWeave shares declined 17% in a week, while rival Nebius lost 18% and Nvidia shed about $270 billion in market value. Bonds for Meta-backed Hyperion dropped below face value, and Oracle's Project Jupiter faced power-related permitting delays affecting $18 billion in loans. The Bank for International Settlements noted concerns about circular financing, where AI customers and suppliers finance one another.

Gartner estimates data centre owners need $8.5 trillion in revenue by 2030 to cover costs and deliver returns, while consumer and corporate spending may reach no more than $3.6 trillion. This could leave over $4 trillion in asset value exposed to writedown risk through 2032, and 80% of neocloud providers may cease independent operations by 2030. OpenAI delayed its initial public offering to next year, and Anthropic saw a slowdown in quarterly sales growth. Despite market pressures, Nvidia CEO Jensen Huang remains optimistic, stating CoreWeave's cost of capital is decreasing and its strength is improving every day.