AI-linked debt markets held up better than equities on Thursday as investors weighed whether a slower data center buildout could ease borrowing needs, even as CoreWeave bonds joined the selloff.
The prospect of restrictions on AI infrastructure development following Democratic victories in this week’s midterm elections has clouded growth expectations for neoclouds and hyperscalers.
But some creditors see a potential benefit: less capital spending could mean less debt accumulation for issuers.
“Definitely more of a headwind for your valuation calculations if you're an equity analyst, but for credit, it feels at this point largely manageable,” said Johnathan Owen, a portfolio manager at TwentyFour Asset Management.
CoreWeave’s shares fell around 10%, while TeraWulf and Nebius each lost roughly 14%-15% as of market close. Hyperscaler losses were more modest, with Alphabet and Amazon each down about 2%, while Microsoft shares lost about 3.5%.
Credit investors face a different calculation. A slower buildout would reduce capital spending and borrowing needs, but also delay revenues. That poses more of a challenge for equity valuations, while creditors could benefit from companies taking on debt more gradually.
“If anything, it could be a short term positive [for creditors],” Owen added, addressing the threats of construction moratoriums.
