AI Data Center Stocks Plunge Amid Debt and Rate Hikes
Investors are selling off AI data center stocks as rising interest rates, debt concerns, and disappointing earnings from Anthropic trigger a market downturn.
A sharp decline in technology and data center stocks has emerged following an earnings announcement from Anthropic that fell short of market expectations. This selloff is compounded by rising borrowing costs as Federal Reserve Chairman Kevin Warsh raises interest rates to combat inflation, with short-term rates potentially reaching 6%.
Investors are increasingly scrutinizing the valuations and debt levels of AI infrastructure firms. CoreWeave is facing scrutiny over its capitalization, though Nvidia CEO Jensen Huang stated the company remains stable. High borrowing costs and demand uncertainty have led several firms to pause or pull high-profile listings, including Holtec International in the United States and the Nvidia-backed Firmus in Australia, which struggled to justify revenue projections against $30 billion in debt. Blackstone also paused a planned REIT listing for AirTrunk.
Despite the volatility in public markets, private M&A activity in Asian data centers remains strong, reaching $21.3 billion this year. This includes AirTrunk's pending $1 billion sale of its Johor facility to investors including the Malaysian pension fund KWAP, and ongoing bids for Bain Capital's Bridge Data Centres. Market instability is further fueled by geopolitical uncertainty regarding President Donald Trump's potential military escalation with Iran and the Houthis, alongside fears of state-level bans on new data centers following U.S. midterm elections.
