AI Firms Face High Interest Rates as Investors Get Nervous

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.