US AI Expansion Hits Bottleneck of Scarce Cheap Funding

Related topics top start Related topics top end Futures promotion begin Futures promotion end Miaopai begin Miaopai end Video player start Video player end Market chart begin Market chart end

For years, companies underpinning the U.S. artificial intelligence boom could easily raise hundreds of billions of dollars. Wall Street was happy to put up the money and rarely asked questions about the details.

Now the balance of power is shifting.

Lenders and investors are becoming pickier about what they invest in and are demanding tougher deal terms, marking a new phase in the AI expansion. Their concerns include: growing public resistance to data centers, which could delay large projects; and the possibility that AI-related profits at hyperscalers and startups such as Anthropic and OpenAI may not materialize as quickly as promised.

New terms are visible in every corner of the market. Even bonds issued by large tech companies such as SpaceX and Meta are trading at steep discounts. People familiar with the matter said AI cloud companies such as CoreWeave, Nebius and Nscale, which borrow heavily, build and sell computing power, have effectively been shut out of the bond market in recent weeks.

In short, Wall Street is now a buyer's market. Even formidable companies like Broadcom have had to offer banks sweeter terms to obtain loans. Dan Ivascyn, chief investment officer at Pimco, said: "The bar for proving to lenders that an investment can generate sufficient revenue is rising higher and higher. The weakest links will come under pressure first."

Raising money in the equity market is no easier. People familiar with the matter said Nscale's hopes of listing next month have fallen through, while rival Lambda cut the target valuation for its new funding round. Other sources said OpenAI's latest funding round actually raised less than half of its initial $30 billion target.

The stock market has begun to reflect investors' concerns that the AI payoff may not arrive, at least not in the short term. This week, disappointing earnings from several tech companies triggered a selloff in AI-related stocks and bonds, with Friday marking one of the largest market declines since the current AI boom began. Google parent Alphabet on Thursday suffered the largest single-day market value loss in its history, shedding about $500 billion, after its earnings showed slowing revenue growth in its core search business while AI infrastructure spending continued to surge.

The market turmoil also hit chipmaker Intel, whose shares plunged 29% on Friday after it reported weakness in its personal computer business. The tech-heavy Nasdaq Composite fell 2.9% on Friday, its worst single-day performance since June. If market volatility continues, fundraising will become even harder.

Companies with strong credit profiles can still get money. SpaceX this week announced it had completed the largest AI chip financing ever, a $40 billion raise to buy Nvidia's latest series of chips.

But that record lasted only a few hours before chip design giant Broadcom finalized a $63 billion deal to provide chip leasing services to Anthropic. Even that deal reflects the pressure of the current environment: Broadcom CEO Hock Tan had to personally intervene at the last minute of negotiations to reassure banks.

Even companies that can successfully raise money are worried about their suppliers' ability to finance themselves. Anthropic plans to raise up to $100 billion through fundraising in mid-November. In its IPO prospectus disclosed this week, it listed financing constraints facing the power service providers its data centers rely on as a risk factor.

Meta announced plans to raise up to $97.5 billion through multiple new stock offerings, saying the move is intended to seize the initiative and stay ahead of rivals. In a securities filing, Meta mentioned recent and future fundraising plans by companies such as Alphabet, SpaceX, Anthropic and OpenAI, which will put pressure on the capital market's capacity to absorb them.

Ben Connard, chief investment officer at Carnegie Investment Counsel, said: "Everyone wants to secure funding for their own expansion before liquidity dries up."

He said: "Ultimately, there may not be enough money to support all the expansion plans. Financing constraints may become the core bottleneck dragging down the entire sector."

Customer prepayments

Since ChatGPT's launch, AI companies have tapped every possible funding channel, from venture capital firms and stock investors to banks, and from bond and private credit fund managers.

Bank of America data show that in the U.S. corporate bond market, AI-related bond issuance totaled $394 billion in 2025 and reached $655 billion by mid-October this year. Analysts expect new AI-related bond issuance to approach $1 trillion next year.

One of the most active participants in the capital markets is the so-called neocloud companies, which build or lease data centers, equip them with large numbers of AI servers, and sign contracts to sell computing power to large tech companies, trading firms and AI startups. They are the most sensitive to rising interest rates in the AI sector, and their borrowing costs were already high before the current market turmoil.

Many neocloud companies grew out of cryptocurrency mining businesses, and most lack long-term experience operating AI infrastructure. Nebius was formerly the entity headquartered in Amsterdam that operated Yandex, Russia's leading internet company. After the Russia-Ukraine conflict broke out, it spun off its core assets and more than two years ago pivoted to providing AI cloud services, partnering with tech companies such as Meta and Microsoft.

Since 2024, Nebius has sold about $2.7 billion of equity to Nvidia and other investors, and has also issued billions of dollars of convertible bonds for AI expansion, but its need for capital remains strong. People familiar with the matter said that from this summer to early autumn, Nebius's bankers arranged meetings between executives and fund managers to prepare for a high-yield bond issuance, which would have been the company's first such bond.

By September, the bond market began to become turbulent. The Federal Reserve raised short-term interest rates for the first time in three years. Difficulties in power supply and approvals prompted Oracle to notify the developer of a large data center in New Mexico to delay paying full rent. This event led lenders everywhere to reassess the construction risks of projects.

CoreWeave's bonds issued earlier this year with a 9.75% coupon now yield more than 15% in the secondary market, meaning borrowing costs have risen sharply in a short period. In recent weeks, bankers have warned that the high-yield bond market for new cloud providers has basically paused accepting new issuance targets, and yields of 15% or more are too high for borrowers to bear.

Nebius ultimately abandoned the high-yield bond issuance. CEO Arkady Volozh said the company needs to continuously innovate ways to obtain expansion funding, including collecting prepayments from customers.

Speaking at a conference in Berlin last week, Volozh said: "Since last week, some funding channels have been temporarily closed, such as asset-backed securities and the bond market. But we are now relying on customer prepayments and various other tools, and these funds can at least support us in building this gigawatt-scale computing center."

Nebius Chief Operating Officer Ophir Nave said that despite Volozh's remarks, the asset-backed financing market remains open, and the company still plans to use that channel in the future. Whether to issue high-yield bonds depends on interest rate levels and the terms that can be obtained.

Equity investors have also begun to panic. People familiar with the matter said that Lambda, which plans to raise $4 billion in the final round before its IPO, lowered its target valuation from $14.5 billion to $13 billion after tech investment institutions such as Coatue chose not to participate.

UK-headquartered neocloud company Nscale, whose board includes former Meta executives Sheryl Sandberg and Nick Clegg, is preparing to go public in the coming months. The company had originally locked in multiple dates in November as alternative IPO windows, but due to market turmoil it now tends to postpone to December.

Separately, sources said Nscale is also in talks with Nvidia and other investors to raise funds for a $45 billion data center project for Anthropic in West Virginia. After the market turned, Nvidia and other potential investors began demanding stricter terms, causing Nscale to delay filing a revised IPO prospectus.

A series of uncertainties led Nscale management to conclude that completing its own IPO before Anthropic's listing would be very difficult. People familiar with the matter said some underwriting banks cautioned that to reach a target valuation of $30 billion to $35 billion, it would be difficult for the IPO to obtain sufficient subscription demand.

Concentration risk

Meta, Amazon, Alphabet and Microsoft have top credit ratings and considerable room to add debt on their balance sheets. But this year many companies have raised large amounts of debt in the investment-grade bond market and said they will continue to do so in the short term, leaving the investment institutions, insurers and pension funds that fund them increasingly saturated and worried about overly concentrated holdings in a single sector.

Pimco's Ivascyn said: "A very real question is, where is the limit on investors' exposure to a single issuer or a single sector?"

Bonds issued by several hyperscale cloud providers fell to near historic lows on Friday, and the price decline drove yields higher, significantly above ordinary investment-grade corporate bonds.

Wellington Management fixed-income portfolio manager Brij Khurana said that purely from a cost-of-capital perspective, Meta would originally have preferred borrowing rather than increasing new share issuance as it did this week.

He said: "Institutional asset managers are already resisting excessive debt issuance by hyperscale cloud providers, which is also the reason for several large equity financings recently." news_keyword_pub,usstock,MSFT&GOOG&AMZN&INTC&.IXIC&ORCL&YNDX iframe below body iframe below body general statement general statement QR code at end start QR code at end start

QR code at end start QR code at end start Editor name and work code

Editor name and work code