AI companies are borrowing big, but investors are getting cold feet. While stock markets keep cheering for AI, the debt world is singing a different tune. New AI startups are finding it tough to borrow money. They have to pay high interest rates. This shows that investors are not so sure about these companies.

Take Applied Digital, for example. They had to pay a lot more interest than other companies. They paid 3. 75 percentage points more. That's like paying 70% more in interest. Ouch!

But it doesn't stop there. Some AI company bonds are losing value after they were issued. This is a red flag. It shows that investors are getting more careful. Plus, the cost of credit default swaps is going up. These swaps protect bond investors from losses. So, why are they getting more expensive? Because investors are worried.

There are other problems too. Building big data centers takes time. And if there are delays, these companies might not make money soon. Investors are also worried about something else. What if there's not enough demand for AI computing power? That could lead to too many data centers. And that could mean big losses.

Will Smith, a portfolio manager, says it well. He thinks investors should be more pessimistic. He says they should not believe all the hype.


    # AI Companies Borrowing Big, but Investors Get Cold Feet

    While stock markets cheer for AI, the debt world sings a different tune. New AI startups face tough borrowing conditions with high interest rates, signaling investor skepticism.

    ## **Applied Digital's High-Interest Burden**
    - **Interest Rate:** 3.75 percentage points higher than peers
    - **Impact:** Equivalent to a 70% increase in interest costs

    ## **Bond Market Red Flags**
    - **Declining Bond Values:** AI company bonds lose value post-issuance
    - **Rising Credit Default Swap Costs:** Investors demand higher protection premiums

    ## **Key Concerns**
    - **Construction Delays:** Building large data centers takes time
    - **Demand Uncertainty:** Potential oversupply of AI computing power

    ## **Expert Perspective**
    > *"Investors should be more pessimistic and not believe all the hype."*
    > — **Will Smith, Portfolio Manager**

    

AI Firms Face High Interest Rates as Investors Get Nervous

Applied Digital's High-Interest Burden

Bond Market Red Flags

Key Concerns

Expert Perspective

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