Cracks emerge in AI borrowing boom as CoreWeave, Oracle and SoftBank debt worries grow

TRILLIONS of dollars in borrowed money have powered the artificial intelligence boom. But now there is growing uncertainty around just how easily more money can be obtained – and how much of it will be paid back.

Those questions burst into the forefront this past week when investors rapidly lost confidence in one debt-laden data centre company, CoreWeave. Prices of its bonds – the company has accrued US$72 billion in liabilities to operate 51 data centres – crashed, and investors placed a more than 60 per cent likelihood that CoreWeave would fail to meet its obligations.

Investors have sold off bonds for other AI giants as well, including Larry Ellison’s company, Oracle, though the price declines are not as steep as CoreWeave’s.

At the same time, Wall Street investors have been bidding up the price of some complicated financial instruments that insure corporate debt against default, like those insuring SoftBank, the Japanese technology colossus that has borrowed heavily to bet its future on a partnership with OpenAI.

The recent market moves could spell losses for investors that own the companies’ existing bonds and could mean the companies will be forced to pay higher interest rates when they borrow again, raising the costs of their already wildly expensive AI projects.

The broader question is whether companies facing debt trouble like CoreWeave, Oracle and SoftBank are the industry’s weak links or are harbingers of deeper problems in the AI build-out.

The spread, or extra premium that investors demand to put their money into risky AI debt investments, has shot up more than 50 per cent over the past six months, according to Barclays, the investment bank.

“The market is on a knife’s edge everywhere,” said Alexandra Coleman, founder of Azraq, a data centre risk researcher.

A lot is riding on the continuation of the borrowing binge. Every week lately, economists, banks and private equity firms project higher and higher amounts of debt that they say will be needed to finance the AI systems that their boosters assert will run the world in a few years.

Virtually every major mutual fund company, insurer and private equity firm has been buying up the AI debt, to say nothing of the scores of individual investors who have poured money into skyrocketing AI companies.

Not every data centre developer worries bond investors equally. The larger so-called hyperscalers, such as Meta and Alphabet, which continue to borrow heavily, have been forced by investors to pay only modestly more in interest in recent debt deals. Investors have also sold out of some these companies’ existing debt, though the drop in bond prices has been less steep than for CoreWeave.

CoreWeave’s business model defies easy description. Its financial arrangements have been compared by some investors and analysts with those of the troubled office-space provider WeWork.

First, CoreWeave buys Nvidia and other AI chips. Then, as with WeWork, which leases space inside office buildings owned by others, CoreWeave contracts with data centre owners to use the structures for AI computing for 15 years or more. CoreWeave then sub-leases the space to customers, including Meta, Microsoft and OpenAI, for a shorter time frame.

The rub is that CoreWeave is on the hook for costs on both ends: It must pay to assemble and operate the facilities before any tenant is in place, and it is committed to the space for longer than its customers may stick around.

Several investors said they worried about whether hyperscalers like Meta and Microsoft would even need to lease space from CoreWeave in the future. Alternately, they are wary of whether the data centres could become dated or even obsolete as their existing contracts expire.

A CoreWeave spokesperson, Lia Davis, said the company disagreed with the WeWork comparison. “The complexity of our financing reflects discipline, which is a point of pride for us,” she said in a statement.

Another worry is the growing number of US data-centre projects being delayed by permitting issues or, in some cases, falling through.

Oracle has faced slowdowns on multiple projects. In 2025, the company easily borrowed US$38 billion from a group of banks to build, with the help of project developers, a pair of data centres, one in Texas and another on about 809 hectares of farmland in Port Washington, Wisconsin.

Oracle planned to pay back the borrowed money on the Texas facility helped by profits from the latter complex, called Project Lighthouse, which it expected to be operational by 2028.

Since then, Project Lighthouse has run into local hurdles, including from state power regulators who have pushed back their time horizon to approve the construction of a power grid critical for the data centre to operate.

Aterio, a data centre researcher, said it was looking less likely that Project Lighthouse’s four data centres would start operating before 2029.

That is just a year before Oracle’s debt comes due. Some of the debt has traded around US$0.90 on the US dollar or below that, according to two traders, a steep drop for a relatively new loan.

An Oracle spokesperson declined to comment.

Oracle faces similar permitting issues at a data centre project in New Mexico. The project’s developer, investment firm Blue Owl, has started construction on the facility, but Oracle is struggling to get state permits to provide enough power.

Some of the US$18 billion in debt tied to the project has recently sold at steep discounts, roughly US$0.80 on the US dollar, according to two people familiar with the trades.

SoftBank has borrowed heavily to make one of the biggest bets – by dollar value – on OpenAI. The Japanese conglomerate, led by Masayoshi Son, wrote its first US$500 million check in 2024 and a year later invested US$30 billion more.

To get that money, Son sold off most of SoftBank’s holdings of Nvidia and T-Mobile and took out loans against his stake in chip designer Arm Holdings.

In 2026, Son invested again. On Oct 1, SoftBank completed another US$30 billion investment in OpenAI. Before doing so, in late September the company raised a record US$11 billion in debt at interest rates of nearly 10 per cent.

In response to questions about SoftBank’s increasing debt, Alex Clavel, CEO of the SoftBank Vision Funds, said the amount of debt as a percentage of SoftBank Group’s assets had not changed.

“The assets we’ve owned have increased significantly,” Clavel said in an interview.

The cost of insuring against losses on SoftBank’s debt has spiked. It now costs more than US$40,000 to insure against US$1 million of SoftBank debt. At the beginning of 2026, the cost was less than US$27,000.

Some investors see a potential silver lining to the troubles. John Lloyd, the global head of multisector and corporate credit at asset manager Janus Henderson, said slowing down the financing for projects “makes existing projects and existing AI infrastructure even more valuable.” NYTIMES