Debt-hungry data center companies increased risk bond yields spike

With Treasury yields climbing this week to their highest levels since 2007, companies reliant on debt are poised to see their borrowing costs rise. That means the AI infrastructure buildout, which has already reached historic levels, is about to get even more expensive.

JPMorgan Chase estimated in June that $4.1 trillion in AI-related debt will be issued through 2030, as data center companies and others tied to the artificial intelligence boom race to build up capacity to meet what many industry experts view as insatiable demand for AI services.

As borrowers go back to the market, they’re now looking at a 10-year Treasury yield that sits near 5.17%, up about 1 percentage point since the start of the year, meaning companies issuing debt are going to have to offer more attractive rates of return to lure investors.

The market isn’t in panic mode, at least not yet. Shares of debt-heavy neocloud CoreWeave have held up fine, rising almost 8% this week, while Oracle, which has counted on the debt market for its AI expansion, has had a tougher time, falling 7% for the week and about 30% this year.

Meanwhile, Japan’s SoftBank, a principal provider of capital for AI projects, raised $11.1 billion in a junk-bond sale this week, with yields as high as 9.75% for the 7-year tranche.

“They basically are price insensitive to that raise, which means they’re price takers,” said Mark Malek, chief investment officer at Siebert Financial, in an interview. “In my view, a lot of these companies need to be price insensitive. They need to get as much capital as possible to compete.”

At the center of the AI craze are leading model developers OpenAI and Anthropic, which are each valued at close to $1 trillion in the private market. To provide the infrastructure needed for their advanced models, as well as models and services from a host of other companies, tech’s hyperscalers — Amazon, Google, Meta and Microsoft — have committed to hundreds of billions of dollars this year in capital expenditures, with an expected increase coming in 2027.

While a healthy dose of that investment is being funded through debt raises, those tech giants all have investment grade credit ratings, providing them with cheaper access to capital. But for the rest of the pack, bigger challenges lie ahead, according to some market participants.