CONNECT WITH US
AI & Deeptech

AI & Deeptech

Rising borrowing costs signal funding risks for global AI expansion: Report

IndiaTimes (ET) - AI logo

Published on

Add as a preferred source on Google
Rising borrowing costs signal funding risks for global AI expansion: Report

Business News Tech AI Rising borrowing costs signal funding risks for global AI expansion: Report

Financial markets are facing elevated credit risks, particularly for firms operating in the artificial intelligence infrastructure sector. A recent Jefferies report highlights stringent borrowing conditions, which have raised alarms for future AI investments. Companies such as Oracle and CoreWeave are seeing increased credit spreads, driving up borrowing costs. While funding for AI initiatives remains steady, potential growth slowdowns may pressure companies.

Financial markets are showing signs of increasing stress in funding the global artificial intelligence (AI) investment boom, with borrowing risks rising for companies involved in building AI infrastructure, according to a Jefferies research report. The report highlighted a sharp increase in credit risk indicators for companies such as Oracle and CoreWeave, raising concerns over whether financial markets will continue to support the massive investments required for AI expansion. In its GREED & fear research report titled "K-shaped stresses, AI tremors and the Houthis," Jefferies' Christopher Wood said investors should closely monitor borrowing conditions as companies continue to spend heavily on AI infrastructure.

The report said investors need to remain "laser focused on credit spreads for any evidence that the market is no longer willing to fund the ongoing AI capex boom". Credit spreads are indicators of the risk associated with lending to companies. A rise in these spreads generally signals that investors are demanding greater compensation for taking on credit risk. According to the report, Oracle's five-year credit default swap (CDS) spread increased from 186 basis points on September 11 to 288 basis points, while CoreWeave's spread surged from 749 basis points to 1,118 basis points during the same period.


Source link
Related Topics:AI & Deeptech

Disclaimer

We strive to uphold the highest ethical standards in all of our reporting and coverage. We TheMorningPulse.fyi want to be transparent with our readers about any potential conflicts of interest that may arise in our work. It's possible that some of the investors we feature may have connections to other businesses, including competitors or companies we write about. However, we want to assure our readers that this will not have any impact on the integrity or impartiality of our reporting. We are committed to delivering accurate, unbiased news and information to our audience, and we will continue to uphold our ethics and principles in all of our work. Thank you for your trust and support.