Blog Post
Volatility Comes for AI Credits
With the headlines vacillating between CoreWeave’s credit woes and Anthropic’s planned blockbuster IPO, it’s worth taking stock of just how much has happened in the space. Two years ago, “AI Infrastructure” was not really a credit sector outside of hyperscalers and a literal handful of GPU deals. This May, when we first tried adding things up, we found just over $100 billion of paper issued by non-investment-grade data centers and neoclouds. Yesterday, we published a report that detailed nearly $900 billion of high-yield and high-grade debt – and we think this is likely an undercount.
We really shouldn’t be surprised. One early report from Morgan Stanley pegged the cost of the AI infrastructure buildout from 2025 to 2028 at $3 trillion, with a big fat “T”, with external financing funding about $1.5 trillion of the total. We are halfway through that window, and this estimate, frankly, is starting to feel a little light to us.
This blistering pace of issuance, however, slowed down considerably in recent weeks as the sector experienced what feels like its first real sell-off. A confusing OpenAI leak, a skeptical comment from Hock Tan of Broadcom, and a bearish Gartner report all combined to send the bonds of CoreWeave, everyone’s favorite (and, also, least favorite) neocloud, into distressed territory, and the rest of the sector followed. The market, which was pricing all data center bonds on tenant risk alone this spring, suddenly started differentiating issuers on operational points as well, putting a hefty penalty on those that looked like they may not be able to deliver their powered shells on time.
As we write this, Anthropic’s S-1 filing seems to be injecting some optimism back into the market, with CoreWeave’s bonds up a few points on the week and trading “only” at a 14-handle yield. With much of the sector reporting over the next two weeks, we should soon get a better sense of whether this is enough to reverse the downward trend – and spin the issuance machine back up.
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