Nvidia reached a deal on Monday to provide up to $105 billion to backstop a new OpenAI data center in Ohio, as Big Tech ramped up its debt-fueled AI splurge.
Much of that growing debt is held off hyperscalers’ balance sheets, and those credit arrangements themselves are growing more convoluted, Morgan Stanley analysts noted, making it “increasingly difficult for investors to assess companies’ total potential leverage.”
The spending spree is raising the specter of a “reverse-crowding-out effect,” Bloomberg wrote, whereby private borrowing is making government debt more expensive, sending US bond yields higher.
A correction in US tech stocks appears likely even if AI eventually satisfies investor hopes, the European Central Bank warned, and the ensuing bust could threaten Eurozone stability.