AI spending vs returns: Why CoreWeave, Meta and Oracle face a debt reality check as $4.9 trillion goes into data centres

Investors are questioning whether AI revenues can justify the industry’s massive data-centre spending. Bonds tied to projects backed by CoreWeave, Meta, Oracle and others have fallen amid rising borrowing costs, construction delays and uncertain returns. 

Investors are now questioning whether revenues from artificial intelligence (AI) will justify the massive debt financing the industry's infrastructure boom, as bonds linked to major data centre projects slide and borrowing costs rise.

The sell-off has hit Nvidia-backed CoreWeave and projects backed by Meta, Oracle and other technology giants. The concerns show a widening gap between infrastructure spending and the revenue AI services are expected to generate, an FT report said

Bonds issued to finance prominent data centres, including Meta-backed Hyperion and Microsoft's Project Excalibur, have fallen below their face value in recent weeks. Investors are reassessing the risks of construction delays, rising financing costs and uncertain returns.

CoreWeave debt enters distressed territory

Neocloud providers, which offer specialised computing infrastructure for AI workloads, have been particularly hard hit. CoreWeave's bonds have fallen below 80 cents on the dollar, a level typically associated with distressed debt, pushing yields close to 15% on Thursday.

CoreWeave shares have declined 17% this week, while rival Nebius has lost 18%. Nvidia, which has invested tens of billions of dollars in neocloud providers and AI start-ups, has shed about $270 billion in market value over the past week.

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The sell-off follows OpenAI's decision to delay its initial public offering until next year and a slowdown in Anthropic's quarterly sales growth, raising questions about whether AI demand can keep pace with infrastructure spending.

Nvidia chief executive Jensen Huang, however, remains optimistic about CoreWeave.

Sanchari Ghosh