These firms you've never heard of are feeding fears the AI bubble could burst
The amount of debt held by data centres is measured in the tens of billions of pounds.
By BBC News
Data centre firms are taking on tens of billions of pounds in debt to build the infrastructure needed to power artificial intelligence, raising concerns about what could happen if the AI boom loses momentum.
The companies, known as “neocloud” firms, operate large data centres filled with expensive computer equipment. They rent computing capacity to major technology companies and AI developers, including Anthropic, OpenAI and Meta.
Unlike established technology giants, many neocloud businesses have built their operations around borrowing. They typically sign long-term contracts with customers before using those agreements, along with the AI chips they buy, as security for further loans.
Analyst Cory Johnson of IPO research firm The Quiet Period said debt was common across the sector because the hardware had to be paid for in advance.
He said lenders could sometimes place greater weight on the financial strength of a neocloud company’s customers than on the company itself. Those customers include major firms such as Microsoft and Meta.
CoreWeave, one of the best-known companies in the sector, has accumulated $35.1bn (£26.3bn) in debt, according to the report.
The scale of borrowing has increased scrutiny of the companies supporting the AI industry. Much of the spending is directed towards data centres, servers and specialist chips, while the long-term returns from that investment remain uncertain.
The risk is that a fall in demand for AI services could leave neocloud firms with costly equipment, large repayments and fewer customers. Bradley Tusk of Tusk Ventures said the companies would “definitely” face collateral damage if the AI market proved to be a bubble that burst.
Their future also depends on continued access to borrowing. Rising interest rates make new finance more expensive, increasing pressure on businesses that rely on debt to expand.
The report describes neocloud firms as a less familiar part of the wider AI market, despite their role in providing the computing power used by some of the sector’s biggest companies.