"The revolution of so-called hyperscalers is reaching ever more colossal proportions. Tech companies' gamble on artificial intelligence is measured in hundreds of billions of dollars investments that until recently came exclusively from astronomical, yet finite, profits. The sector still needs more data centers, and to finance them, it has begun turning to the debt markets, raising investors' concerns and cooling the market's previously warm embrace of technology."
"Oracle, the most indebted of the major players and one that has pinned its future on contracts with OpenAI, is at the center of these doubts: its shares have fallen 33% from their September peak. Its debt is taking a hit as well, trading below par, while credit default swaps on its bonds a measure of financial risk have risen to levels unseen in three years, dragging along those of other companies with high AI exposure and weaker credit histories."
"According to J.P. Morgan's estimates, building the global infrastructure of data centers and AI, along with the necessary energy supplies, will cost more than $5 trillion by 2030. Of that total, only $1.5 trillion will come from companies' organic cash flow; the remainder will require major tech firms to turn to the capital markets. It will be an extraordinary and sustained capital markets event, the bank concludes."
The hyperscaler era has prompted tech companies to invest hundreds of billions of dollars in artificial intelligence and data-center infrastructure. The sector requires many more data centers, shifting financing from profits to debt markets and raising investor concerns. Oracle, heavily indebted and tied to OpenAI contracts, has seen its shares fall 33% and its debt trade below par, while credit-default swaps climb. J.P. Morgan estimates more than $5 trillion will be needed by 2030 for AI infrastructure and energy, with only $1.5 trillion from organic cash flow, implying massive bond issuance and significant pressure on capital markets.
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