Treasury yields have climbed to their highest levels since 2007, raising borrowing costs just as data center operators ramp up an AI buildout financed heavily by debt. JPMorgan Chase has estimated $4.1 trillion in AI-related debt issuance through 2030, and lenders say they are growing more selective about which projects they will fund.
The 10-year Treasury yield sits near 5.17%, up about 1 percentage point since the start of the year, meaning companies issuing new debt must offer more attractive rates to lure investors. JPMorgan Chase estimated in June that $4.1 trillion in AI-related debt will be issued through 2030, as data center companies race to build capacity for what many in the industry view as insatiable demand for AI services.
Reactions diverge across borrowers
Shares of debt-heavy neocloud CoreWeave rose almost 8% this week. Oracle fell 7% for the week and about 30% this year. Meanwhile, Japan's SoftBank raised $11.1 billion in a junk-bond sale this week. It saw yields as high as 9.75% for the 7-year tranche. According to Mark Malek, chief investment officer at Siebert Financial: "They basically are price insensitive to that raise, which means they're price takers."
Hyperscalers Amazon, Google, Meta and Microsoft have committed hundreds of billions of dollars this year to capital expenditures, with an increase expected in 2027. But those companies carry investment-grade credit ratings, giving them cheaper access to capital than smaller neocloud operators face.
Lenders turn more selective
A senior private credit investor told CNBC that neocloud financing deals will get harder to arrange going forward because the companies have less cushion to absorb higher costs. A vice president at Mitsubishi HC Capital America said lenders are getting pickier about which projects they fund even when borrowers agree to pay higher rates.
CoreWeave has flagged the risk in its own filings: the company said every 100-basis-point increase in rates could add $30 million to its interest expense, based on its outstanding floating-rate debt as of June. Oracle, meanwhile, sent a "force majeure" notice tied to its New Mexico data center project, seeking to delay payment if the site fails to come online as expected in 2028; Oracle said the project remains on its planned schedule.
Demand still outweighs cost
Even so, market participants expect borrowing to continue at a rapid pace. A credit rating agency executive said he doesn't expect the higher rates to significantly slow borrower demand, while a lawyer who works on AI infrastructure financing said strong demand for compute makes rising costs easier to absorb.
For borrowers already locked into contracts with OpenAI or Anthropic, an executive who advises on GPU financing said, a fraction of a percentage point on financing costs is unlikely to change their plans.
Source: CNBC
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