After Jensen Huang’s downfall, here’s an even bigger problem that threatens the AI industry | Latest Tech News
While Wall Street stays riveted by the fall of Jensen Huang, yet another industry menace looms – specifically the mountains of debt on the typical AI company’s steadiness sheet and the fact that financing is beginning to run dry, On The Money has discovered.
Debt financing has been the go-to technique for AI gamers to fuel their wild growth over the past two years. More than $560 billion of it has been issued worldwide in 2026 alone for data facilities, cloud companies, chips – all the stuff that goes into AI.
But AI executives say the debt spigot has not too long ago been squeezed shut, making it prohibitively expensive even for bigger gamers in latest weeks. Not only are many firms being rated below-investment grade, or junk — that means they’ve to pay up to promote debt — banks are getting fickle with lending.
Debt financing has been the go-to technique for AI gamers to fuel their wild growth. But AI executives say the debt spigot has not too long ago been squeezed shut. Jack Forbes / NY Post Design
Indeed, sources inform On The Money that banks are now attempting to unload their portfolios of AI data-center loans instead. Teams inside the greatest banks are re-evaluating their portfolios to match current, more dyspeptic market circumstances as opposed to those forgone bubble valuations at which the loans have been made.
“I’ve been working on data center financing since 2021,” said one banker who requested not to be named. “Every bank is stuffed to the gills with this stuff and looking to dump their portfolios.”
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Maybe the worst half of the AI correction (or is it the start of a crash?) is that it has little to do with the revelations that Nvidia’s now-ex-CEO had a fling with a lady who the authorities alleges might also be a spy for the Chinese.
In other phrases, unhealthy news – the AI debt debacle most likely isn’t one thing that will be fixed with better company governance at Nvidia.
Rather, the problem is more existential and intractable – including all that debt, and fears that company valuations could have amounted to irrational exuberance that appears to have outpaced financial efficiency.
Anti-AI socialists are now poised to dominate DC coverage with the Dems taking both chambers of Congress during the midterms. Getty Images
On top of that, anti-AI socialists are now poised to dominate DC coverage with the Dems taking both chambers of Congress during the midterms.
As one major AI investor told me, all of the above is “causing a s–tstorm in the debt markets right now.”
Yes, AI is right here to keep for heaps of causes including its use in drugs, business and national security. There are deliberate stock choices by its two greatest gamers. Anthropic is probably going coming public next week with an IPO that will worth the company at around $1.4 trillion. OpenAI is aiming for a equally sized IPO early next 12 months.
Even if those offers occur (and there’s no guarantee they are going to given the markets’ bitter temper), these firms are big and established. They raised their debt already for a lot of their buildout and infrastructure. It’s the broader AI business that is and might be feeling the squeeze as the debt window closes, possibly the defining second for AI signaling a long-awaited correction, industry executives say.
Banks are getting fickle with lending to fund the AI buildout. Protesters earlier this month in New York. Michael Nigro/Pacific Press/Shutterstock
Companies like CoreWeave, a so-called neocloud that financed its operations largely through debt, may have a onerous time raising money in the bond market. Given its stock price, equity buyers received’t be in the temper to throw it money either.
That vicious cycle – debt markets closed or too costly and choosy stock patrons – might simply flip into an AI winter for many firms, or possibly all of them. Sure AI-related outfits like Meta, Google, Amazon and Microsoft can rely on their diversified business fashions to discover investor money.
But once Anthropic does its IPO, will it actually need to faucet debt markets for extra financing? It’s wanting at a debt score in the junk bond vary once it turns into a public company. It’s also wanting at a possible slowdown from its torrid growth.
All of the above quantity to underappreciated truths about the booming business of AI. Investors may need to take heed forward of any blockbuster IPOs.
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