A.I. Is Running on Borrowed Money

"The hunger for cash is likely to mount. Bank of America noted that these big tech companies, which formerly operated on relatively little invested capital, are now as capital-intensive as old-line fossil fuel companies like Exxon Mobil and Chevron.

So the tech companies are going to the capital markets, mainly the bond market, which has begun to charge premiums for what it considers to be heightened risk. Oracle and Amazon bond prices have been hard hit. So have those issued by SpaceX, which is also building A.I. data centers. Its bonds are rated as investment grade but have been trading at fire-sale prices, like junk bonds.

One problem is that the expected revenue for the data centers isn’t rock solid. Much of it is linked to A.I. start-ups like OpenAI and Anthropic, which themselves rely on borrowed funds and speculative investments by venture capitalists and private equity funds. Oracle’s heavy dependence on OpenAI makes it especially vulnerable, S&P Global said."

From the article:

Risk is rising as big tech companies like Oracle — the ultimate financial source of the Ellison media empire — need to turn to the bond market for staggering sums to finance data centers.