Investors are demanding more compensation for AI-linked borrowing as Alphabet raises capex, power costs climb, Oracle CDS rises and Meta seeks funding for a $12 billion Texas data center.
Bond investors are demanding higher yields and wider credit spreads on AI-linked borrowing, including a new BlackRock-led financing deal, as concern grows over whether heavy artificial-intelligence spending will translate into durable revenue, profits and cash flow. The repricing has spread across debt tied to Google, Amazon and Meta after Alphabet raised its capital expenditure outlook, with rising power costs for U.S. data centers adding to funding pressure. Barclays said Oracle’s 5-year CDS, a credit-default swap used to hedge default risk, has become a liquid proxy for broader AI debt fears, while Mizuho told clients hyperscalers are on track to collectively spend more on capex than they generate in free cash flow by next year. The Financial Times reported Meta’s financing for a $12 billion Texas data center is expected to price at a higher borrowing rate than earlier projects. The reports also said prediction markets show lower odds of a Federal Reserve pause through September, though future rate expectations remain dependent on incoming inflation, employment and geopolitical developments.