Debt funding ratcheting up risks of AI boom

For years, the tech industry’s giants, which make tens of billions of dollars in annual profits, usually built new data centers with their own money.

- CADE METZ

Just last year, Google expanded an already massive computing facility in Oklahoma, while Amazon went to work on a new data center in Indiana that will eventually use enough electricity to power over a million homes.

But a new set of free spenders is emerging in the gallop toward bigger and bigger artificial intelligence projects. Smaller outfits — far from household names, not nearly as wealthy but eager to get in on the AI boom — have started to build their own giant data centers. And they are borrowing tens of billions of dollars to do it.

In September, Meta agreed to buy $14.3billion in computing power from CoreWeave, a New Jersey company that went public this year. CoreWeave has billion in computing power it plans to sell to customers over the next four years through new data centers, it must borrow $2.85 billion.

The same month, Microsoft made a similar deal with Nebius, a startup based in Amsterdam, for $19.4 billion. To help build its data centers, Nebius recently sold $3.16 billion in what are called convertible notes, which can be converted into company shares years down the road but begin as debt.