Major companies in the artificial intelligence sector are turning to financing markets to obtain tens of billions of dollars to finance the purchase of chips and computing equipment, in an indication of the escalating cost of building data centers and the acceleration of the transition of financing the artificial intelligence boom from cash flows to debt.
According to the Wall Street Journal, Broadcom is in talks to arrange financing exceeding $50 billion for OpenAI to purchase custom artificial intelligence chips, while Oracle is in talks with Apollo Global and Goldman Sachs to provide financing to purchase large quantities of chips.
According to the newspaper, SpaceX, in turn, is searching with financing parties for a deal worth $40 billion to finance the purchase of chips from Nvidia, according to a person familiar with the discussions.
These deals indicate the amount of financing required to keep pace with the rapid expansion of artificial intelligence infrastructure, after cloud computing companies traditionally relied on their cash flows to finance the purchase of equipment, before in recent years they resorted to bond markets to finance data center expansions.
The Wall Street Journal said that cloud computing companies have already issued hundreds of billions of dollars in bonds to finance their expansion in artificial intelligence, prompting public debt markets to absorb increasing amounts of borrowing.
As the cost of these investments rose, some companies began turning to Wall Street investment firms to provide financing for chip purchase deals, worth tens of billions of dollars per deal.
The new wave of buyers includes AI companies such as OpenAI and Anthropic, which previously relied heavily on leasing computing power from cloud providers, but are now moving to owning more of their own infrastructure to cut costs and reduce dependence on other companies.
According to the newspaper, the new financing that Broadcom is seeking to arrange for OpenAI may include computing capacity of up to several gigawatts of chips, with the deal expected to be completed before the end of the year. This comes after a partnership announced by the two companies last year to develop chips dedicated to “Open AI” with a total capacity of 10 gigawatts, with the deployment of these systems starting in the second half of 2026 and continuing until the end of 2029.
In Oracle's case, the funding aims to bridge the time gap between paying off the cost of computing equipment and the start of revenue flow from associated cloud computing services.
The newspaper said that one possible structure for the deal would be for investors to finance an independent company that would buy the chips and then lease them to Oracle over a period of time. This structure would allow the company to finance its expansion into artificial intelligence infrastructure without increasing its direct debt, at a time when it competes with larger technology companies that have huge financial capabilities.
These arrangements reflect a shift in the way the artificial intelligence boom is financed, as the challenge is no longer limited to providing chips, energy, and data centers, but rather extends to securing the capital necessary to finance the huge investments that precede generating revenues from them.
South Korea said on Thursday that diesel shipments allegedly sent to Russia, which have drawn criticism for possibly helping to ease Russian fuel shortages, are not subject to Korean export restrictions, while stressing at the same time that the source of the fuel is still under investigation.
The Guardian newspaper reported this week that more than 176,000 tons of fuel, mostly diesel, were shipped from South Korea to Russia during July and August, based on port records and ship tracking data.
The South Korean Foreign Ministry said that refined oil products, including commercial diesel and jet fuel referred to in the report, are not subject to the export controls imposed by Seoul on Russia.
She added that South Korea's total exports to Russia had fallen by more than half since the start of the war, but stressed that it was "not proven" that fuel of South Korean origin, including diesel, was exported to Russia.
The report raised additional tension in relations between Seoul and Kiev, whose relations are already witnessing disagreements over South Korea's treatment of North Korean soldiers captured by the Ukrainian side.
An advisor to Ukrainian President Volodymyr Zelensky said this week that the alleged diesel shipments sharply contradict South Korea's sanctions policy, something Seoul rejected, describing the statements as "factually inaccurate" and "inappropriate."
According to the Guardian report, three of the seven tankers said to have loaded in South Korean ports were subject to sanctions.
The South Korean Foreign Ministry said it was conducting "further verification" of the ships' routes to determine whether they had committed any violations of local laws.
South Korea has been supporting Ukraine financially and humanitarianly since the outbreak of the Russian-Ukrainian war in 2022, while North Korea has strengthened its relations with Moscow and sent forces to support the Russian war, in exchange for economic benefits and military technologies, according to what Seoul and Kiev say.
Relations between South Korea and Ukraine have been tense since Zelensky announced last month the transfer of two captured North Korean soldiers to South Korea, a move that Seoul said put the families of the two captives in danger. South Korean President Lee Jae-myung demanded a public apology, while Ukrainian Foreign Minister Andriy Sepha described the incident as a "diplomatic misunderstanding."
Asian stocks fell, Thursday, at a time of increasing pressure on sovereign bond markets as major technology companies tend to borrow billions of dollars to finance their expansion in artificial intelligence, which increases competition for financing in global markets.
The rise in borrowing from technology companies coincided with a rise in US bond yields, at a time when a new jump in oil prices, due to the escalation of attacks on shipping in the Gulf, added additional pressure on the US Treasury market.
Japan's Nikkei index fell 1.1 percent, while the South Korean stock index fell 2.1 percent, and the broader MSCI index of Asia-Pacific stocks outside Japan fell 1.2 percent.
On Wall Street, futures contracts for the S&P 500 and Nasdaq indexes fell 0.1 percent each, while futures contracts for major European stocks stabilized.
In commodity markets, Brent crude rose 2.1 percent to $102.30 a barrel, while West Texas Intermediate crude rose 1.7 percent to $89.79.
Pressure on the credit market increased after reports emerged that major technology companies, including SpaceX, Broadcom, and Oracle, were seeking to raise tens of billions of dollars to purchase chips used in artificial intelligence applications.
Broadcom is looking for $50 billion in financing, while SpaceX plans to issue $30 billion in investment-grade debt, in addition to obtaining loans worth $10 billion to buy chips from Nvidia, which is a major shareholder in SpaceX.
This news led to the cost of insuring SpaceX's debt rising to record levels, while the company's shares and bonds declined.
Nigel Green, CEO of De Veer Group, said that the expansion of artificial intelligence began by relying on cash liquidity, but it is increasingly turning to debt financing, which changes the nature of the risks associated with this investment.
In contrast, directing a large portion of this money to purchasing artificial intelligence equipment may support the profits of semiconductor and memory companies. On Thursday, Samsung Electronics expected its operating profits in the third quarter to rise 783 percent to 107.4 trillion won ($80.17 billion), despite its stock declining 1.2 percent.
Concurrent pressures on bonds
The rise in corporate debt comes at a time when sovereign bond markets are facing pressure from inflation fears, widening fiscal deficits and rising short-term interest rates.
The minutes of the Federal Reserve's last meeting showed that "most" officials saw that raising interest rates again before the end of the year was likely, while stressing that their decisions would remain linked to economic data.
Markets are pricing in a 19 percent probability of raising interest rates at the October meeting, compared to an 80 percent probability of raising them in December.
Goldman Sachs analysts wrote that they expect to raise rates again in December, while at the same time suggesting that the Fed will eventually conclude that further tightening is unnecessary.
The two-year US Treasury bond yield stabilized at 4.78 percent, while the 10-year bond yield rose to 5.3019 percent, after overnight recording its highest level in 24 years at 5.326 percent.
In Europe, French bond market pressures extended to Italy and Greece, prompting investors to sell the euro, which fell to $1.1204 after falling 0.6 percent in the previous session.
On the other hand, the dollar index rose to 102.22 points, near its highest level in 18 months, while the dollar stabilized against the yen at 158.10 yen.
Gold, which does not generate a return, fell due to rising returns, but recovered 0.6 percent to $4,136 an ounce after finding support at its lowest level in two months.
