AI Boom Faces Debt Pressure as 5% Yield Threshold Looms

Big technology companies are spending huge amounts of money to build AI data centers and buy computer chips.

At first, they mostly paid for this spending with money from their businesses.

Now, they are increasingly borrowing money.

Borrowing becomes more expensive when long-term interest rates rise.

The 10-year Treasury yield has moved above 5%, which can make investors less willing to pay very high prices for AI-related stocks.

Some companies are earning more from cloud services, but their spending is growing even faster.

Oracle has shown how this can create financial pressure, with large debt and negative free cash flow.

Supporters say AI could eventually become productive enough to justify the investment.

Critics worry that the industry may be building more capacity than its current revenue can support.