Feeding the AI beast
QQQ•Investor concerns about the capital needed to build AI infrastructure weighed on technology stocks. Morgan Stanley estimates the sector will require $1.5 trillion in external financing by 2028, while SpaceX, Broadcom and Oracle are expected to raise billions for AI chips.
1. AI funding concerns
Investor concerns about AI companies’ appetite for capital to build infrastructure have sharpened amid persistent worries about valuations and profitability. OpenAI reportedly told investors its annualized revenue for September was almost $50 billion, below what it had signaled earlier. Australian data center operator Firmus shelved its planned $5 billion IPO and said it would pursue private fundraising instead.
2. More financing expected
SpaceX, Broadcom and Oracle are expected to raise billions to buy high-end AI chips. Morgan Stanley estimates AI infrastructure will require $1.5 trillion in external financing by 2028, as investors seek greater visibility into the customers and cash flows supporting investments whose returns may take years to materialize.
3. Rates and energy pressures
The article says higher global interest rates and elevated bond yields are making financing more expensive. Brent crude futures remained above $100 per barrel, while euro zone finance ministers and the European Central Bank urged France to pass a 2027 budget to calm bond markets.
