While Wall Street stays riveted by the fall of Jensen Huang, yet another industry threat looms – namely the mountains of debt on the typical AI company’s balance sheet and the fact that financing is starting to run dry, On The Money has learned.
asserted
Money → stay → sheet
Debt financing has been the go-to method for AI players to fuel their wild expansion over the past two years.
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players → go → years
More than $560 billion of it has been issued worldwide in 2026 alone for data centers, cloud services, chips – all the stuff that goes into AI.
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that → issue → AI
But AI executives say the debt spigot has recently been squeezed shut, making it prohibitively pricey even for bigger players in recent weeks.
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it → say → weeks
Not only are many companies being rated below-investment grade, or junk — meaning they have to pay up to sell debt — banks are getting fickle with lending.
asserted
banks → rat → lending
Indeed, sources tell On The Money that banks are now trying to unload their portfolios of AI data-center loans instead.
asserted
banks → tell → loans
Teams inside the biggest banks are re-
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Teams → re → banks
evaluating their portfolios to match current, more dyspeptic market conditions as opposed to those forgone bubble valuations at which the loans were made.
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loans → evaluate → which
“I’ve been working on data center financing since 2021,” said one banker who asked not to be named.
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who → work → 2021
“Every bank is stuffed to the gills with this stuff and looking to dump their portfolios.”
asserted
bank → stuff → portfolios
Maybe the worst part 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 woman who the government alleges could also be a spy for the Chinese.
uncertain
government → have → Chinese
In other words, bad news – the AI debt debacle probably isn’t something that can be fixed with better corporate governance at Nvidia.
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that → fix → Nvidia
Rather, the problem is more existential and intractable – including all that debt, and fears that company valuations may have amounted to irrational exuberance that seems to have outpaced financial performance.
uncertain
that → include → performance
As one major AI investor told me, all of the above is “causing a s–tstorm in the debt markets right now.”
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all → tell → markets
Yes, AI is here to stay for lots of reasons including its use in medicine, business and national security.
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AI → stay → medicine
Anthropic is likely coming public next week with an IPO that will value the company at around $1.4 trillion.
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that → come → trillion
OpenAI is aiming for a similarly sized IPO early next year.
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OpenAI → aim → IPO
Even if those deals happen (and there’s no guarantee they will given the markets’ sour mood), these companies are big and established.
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companies → happen → mood
They raised their debt already for much of their buildout and infrastructure.
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They → raise → buildout
It’s the broader AI business that is and will be feeling the squeeze as the debt window closes, maybe the defining moment for AI signaling a long-awaited correction, industry executives say.
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executives → ’ → correction
Companies like CoreWeave, a so-called neocloud that financed its operations largely through debt, will have a hard time raising money in the bond market.
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that → call → market
Given its stock price, equity investors won’t be in the mood to throw it money either.
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investors → give → money
Charlie Gasparino has his finger on the pulse of where business, politics and finance meet
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business → meet → inbox
That vicious cycle – debt markets closed or too expensive and picky stock buyers – could easily turn into an AI winter for many companies, or maybe all of them.
uncertain
cycle → close → them
Sure AI-related outfits like Meta, Google, Amazon and Microsoft can rely on their diversified business models to find investor cash.
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outfits → relate → cash
But once Anthropic does its IPO, will it really want to tap debt markets for additional financing?
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it → do → financing
It’s looking at a debt rating in the junk bond range once it becomes a public company.
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it → look → range
It’s also looking at a likely slowdown from its torrid growth.
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It → look → growth
All of the above amount to underappreciated truths about the booming business of AI.
asserted
All → boom → AI
Investors might want to take heed ahead of any blockbuster IPOs.
uncertain
Investors → want → IPOs
The Aporia
