Market selloff, rising rates test AI data centre deal boom

An interesting difference between the AI boom and the dot com boom is that back then companies would IPO to raise capital and might have been forced to IPO when they were beyond 500 investors incl employees. These days these companies have already raised capital via private equity and the laws changed which allow them to not count employees with equity and have much higher investor counts. An IPO by either of the frontier labs companies is really a cash-out and payback on the capital they have borrowed. My thinking is the stock price would go down, possibly significantly, after an IPO.

Oracle's credit rating is hovering just above junk bond level. I think the capital agreements are similar to an Adjustable Rate Mortgage and monthly so if there's another rate increase from the Fed and Oracle can't find anyone to buy their bonds and/or their free cash flow continues to be negative then maybe that is a pin-prick in the stock bubble? Its sort of like if you keep bouncing around from 0% credit card offer for 12 months to another and then you stop getting 0% offers, then its time to face the music (those usually have a 3% transaction fee, at least a long time ago they did).

Ed Zitron might be too dismissive of the potential of LLMs but he seems to be the only popular journalist holding the companies accountable for wonky reports on their profitability.

Looks like this time wasn't different after all.

AI midterm is coming.

In other AI news, 5090s are going for $9000 apiece. AI is so over, amIRight?

has anyone written about what happens if all these billion-dollar-a-pop AI datacenters are actually built

and then the finance paying workload never materializes?

so they just declare bankruptcy and what society just absorbs it?

actually, because AI is the only industry that can monetize so high, interest rates will go up and all other companies except for AI will be hit. Change in traditional economics, humans can't understand exponential tech.

It should be expected the Fed will continue to raise rates.

US Producer Prices Up Most Since 2022 as Energy Pain Worsens - https://www.bloomberg.com/news/articles/2026-10-15/us-produc... - October 15th, 2026

CoreWeave Credit Risk Hits Record, Pricing 60% Odds of Default - https://www.bloomberg.com/news/articles/2026-10-15/coreweave... - October 15th, 2026

- The cost of protecting CoreWeave’s debt against default for five years rose by as much as 74.5 basis points to 1194.5 basis points, according to ICE Data Services. That’s the highest intraday level on record with swaps pricing in a more than 60% chance of default within the next five years.

- Meanwhile, some of the company’s bonds declined in the US junk market. Its 9% notes maturing in 2031 fell by about 2.5 cents on the dollar to 80.75 cents as of 11:00 a.m., pushing the yield on the debt to 15.3%, according to Trace. Its 9.25% bonds due 2030 dropped by about 0.75 cents to about 86 cents, pushing the yield to 14.3%. At the same time, some notes edged higher, with its 9.75% notes due 2031 rising 0.125 cents to 80.625 cents.

- “Debt investors are freaked out about CoreWeave’s cost of equity and equity investors are freaked out about its cost of debt,” said Bill Zox, portfolio manager at Franklin Templeton Fixed Income.

CoreWeave's Bonds Turn Distressed, Drawing 'Yikes' from Musk - https://news.ycombinator.com/item?id=50090791 - October 2026

- However, D.A. Davidson analyst Gil Luria, who has referred to CoreWeave as “the subprime tranche” of AI, warned on a podcast that the stock could go to zero if the AI funding boom falters and the company becomes unable to pay its expensive debt obligations.

- Luria told Bloomberg Television on Wednesday that CoreWeave was “destroying value at every turn” by borrowing at such elevated rates.

- “If CoreWeave is borrowing at 9% and the best return they can get off of that is a 5% return, it doesn’t matter how much they scale,” he said.

- “Borrowing at very high interest rates in order to build data centers that are increasingly commoditized outside of the hyperscalers may not end up being a good investment,” he continued. “The more leverage we use to build data centers, the more risk we’re bringing into the system.”

Monitor CoreWeave equity and debt pricing to understand where we are in the AI capital bubble cycle.

I am mildly invested ( figuratively and literally so take my next words with that in mind ) in the outcome and raised rates are certainly a possible outcome ( and oddly, one I was suggesting for the longest time as all but inevitable ), but, and it is not a small but, there is a reason those data centers are being built that that reason did not change much. I am just sayin'.