Artificial intelligence is big business, and competition for many of them is stiff these days. The resulting spending spree, which has been coined “hyperscaling,” is resulting in billions of dollars to buy semiconductor chips, build data centers, and develop the software to run AI.
Morgan Stanley estimates hyperscalers will raise around $400 billion in corporate bonds in 2026 to scale AI. And JPMorgan recently estimated that AI and data center firms account for 14.5% of its $10 trillion investment-grade bond index. That’s nearly $1.5 trillion in existing debt.
This is a lot of spending, and if the returns on these massive investments don’t turn out as planned, it could spell disaster for both these firms and the investors who bought their stocks.
This post originally appeared at The Motley Fool.