The latest constraint on AI infrastructure is not limited to chips or electricity. Borrowing has become more expensive, and investors are showing greater reluctance to finance companies that are building data centers and renting out computing capacity, according to The Wall Street Journal.
Companies including CoreWeave, Nebius and Nscale have had difficulty issuing bonds in recent weeks. Debt markets are an important source of funding for their expansion, so the change in investor appetite could delay new data center projects.
The higher cost of financing is illustrated by two examples. QTS had considered borrowing $800 million six months ago. It is now seeking a similar amount, but the loan is expected to generate between $4 million and $6 million more in annual interest costs. CoreWeave, meanwhile, sold debt earlier in the year at a 9.75% interest rate. Investors now reportedly require returns above 15% on its bonds.
Nscale is already feeling the pressure. The company postponed its planned initial public offering until December after potential financiers for its data center project for Anthropic demanded tougher terms.
Broadcom chief executive Hock Tan warned in October that financing could become a bigger obstacle for AI infrastructure than shortages of chips or electricity. The market’s concerns include possible delays caused by local opposition to data center construction and doubts about how quickly AI-related profits will arrive. Investors also believe they already have substantial exposure to the sector.
Having a major customer is not necessarily enough to secure favorable financing. QTS built a data center for Microsoft, but the debt connected to that project has become more expensive since April, while Microsoft’s own borrowing costs have changed little. Investors are increasingly distinguishing between lending directly to Microsoft and lending to a company that leases facilities to it.
Money has not disappeared entirely. AI companies had raised $466 billion in debt by September, more than four times the amount recorded a year earlier, according to Morgan Stanley. At the same time, chip supplies remain tight: Tan has suggested that the shortage may not ease until 2028 or 2029, while other estimates extend to 2030.
The issue, therefore, is less a lack of capital than a shortage of cheap capital, particularly for companies that do not yet generate enough earnings to fund their construction plans. The president of EQT has used the term “bragawatts,” highlighted by Semafor, for large power announcements that do not necessarily become operational projects. Securing megawatts may be easy; delivering connected capacity and paying for it upfront is considerably harder.
Sources: Xataka.