AI infrastructure firms slump as US rate hike bets rise
Shares of major AI infrastructure and data center companies fell sharply as rising interest rates increased concerns about the cost of financing the industry's expansion. Analysts are questioning whether the massive capital expenditure in AI will yield the expected financial returns.
Why it matters
The market downturn reflects growing investor skepticism regarding the profitability of the current AI infrastructure boom amid a tightening economic environment.
Oct 14 (Reuters) - Shares of debt-heavy AI firms tumbled on Wednesday as prospects of higher interest rates intensified concerns over the financing of the industry's massive buildout.
Companies whose shares had rallied earlier this year on AI optimism were some of the worst performers on the main benchmarks.
• Shares of neocloud firms Nebius and CoreWeave dropped 15.1% and 9.5%, respectively
• CoreWeave stock set to wipe out about a quarter of its value this month, Nebius set to erase almost 20%
• Data center operators Applied Digital and IREN down 8.8% and 9.9%, respectively
• Shares of debt-laden AI hyperscaler Oracle were down 7.2% and most of its dollar bonds had also declined
• "Investors are questioning whether the AI buildout will generate the returns that were expected," said Kim Forrest, chief investment officer at Bokeh Capital Partners
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