Trump risks undermining AI boom with potential Iran strike: Joachim Klement
CRWV•A renewed US-Iran conflict could lift oil prices, inflation and borrowing costs, threatening investment in AI data centers. Brent rose above $115 a barrel late last week, while CoreWeave faces borrowing costs above 15%.
1. Oil and rate risks
A renewed Middle East conflict could intensify the oil shock, keep inflation elevated and prompt central banks to tighten policy, raising funding costs for AI data-center construction. Brent crude rose above $115 a barrel late last week on fears of renewed fighting, a renewed effective closure of the Strait of Hormuz or further attacks on Saudi energy infrastructure. Prices fell more than 8% on Monday and declined further on Tuesday, but the article says the risk remains to the upside.
2. AI financing pressure
Large AI data-center projects require substantial spending on chips, power, land and construction. Alphabet, Amazon, Apple, Meta and Microsoft are increasingly relying on debt to finance capital spending; their spreads over five-year US Treasuries have widened over the past year. CoreWeave, a neocloud provider of GPU computing power, faces borrowing costs above 15%, making new data-center projects difficult to justify economically.
3. Potential feedback loop
Higher oil prices could delay rate cuts or prompt more aggressive tightening, adding to company-specific credit spreads and benchmark rates. That could raise financing costs, intensify investor concerns about AI project profitability and slow investment. The scenario depends on an escalation in the conflict, sustained higher oil prices and a forceful central-bank response; diplomacy or a temporary inflation spike that policymakers look through could limit the impact.
