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Rising Borrowing Costs Threaten Global AI Infrastructure Boom
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News18•17-10-2026, 15:15
Rising Borrowing Costs Threaten Global AI Infrastructure Boom
- •A recent Jefferies research report warns that financial markets are showing increased stress in funding the global artificial intelligence investment boom.
- •Credit risk indicators for major AI infrastructure players like Oracle and CoreWeave have surged to their highest levels since early 2023.
- •Oracle's five-year credit default swap spread rose significantly, while CoreWeave saw its spread jump sharply alongside high bond yields reaching 14.8 percent.
- •While funding has not stopped, rising borrowing costs and widening credit spreads serve as early warning signs for investors monitoring heavy AI capital expenditures.
- •Consensus earnings growth for global AI stocks is projected to moderate in the coming years, potentially increasing pressure on companies to justify massive spending.
Key Questions Answered
Oracle's five-year credit default swap spread increased from 186 basis points on September 11 to 288 basis points. Meanwhile, CoreWeave's spread surged from 749 basis points to 1,118 basis points over the same period, reaching the highest levels since the AI capex cycle began in early 2023.
Consensus earnings growth for global AI stocks is expected to moderate from approximately 100 per cent in 2026 to 30 per cent in 2027 and further drop to 22 per cent in 2028.
Global AI stocks currently trade at 23 times forward earnings, whereas non-AI stocks trade at 13 times forward earnings. This reflects a considerable valuation gap as financing risks and slower expected earnings growth increase pressure on companies.
