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Free newsletter: Outside of major hyperscaler backstops, I estimate that Anthropic and OpenAI would get a speculative B or CCC credit rating, which would be insufficient for the $50bn-$100bn a year they need, in an era of historically high interest rates. www.wheresyoured.at/credit-crunch/

To feel optimistic about the AI bubble paying off, you have to be willing to ignore the mountains of evidence before your eyes. The latest indicator of bad things to come that debt is becoming more expensive than ever. www.wheresyoured.at/credit-crunch/

To be clear, this isn't something affecting just those exposed to the AI bubble. All corporate debt is influenced by the cost of ten-year treasuries, the cost of which has soared recently, making junk-heavy data center debt much more expensive to raise. www.wheresyoured.at/credit-crunch/

For a company like Oracle, that must continuously raise debt, this is disastrous. Not only is the baseline cost of borrowing higher, but also, its previous debt looks shaky, meaning that investors will demand more yield to cover their risk. www.wheresyoured.at/credit-crunch/

As bad as this is, it'll be worse for OpenAI and Anthropic, both of which are guaranteed to be repeat visitors to the debt markets, needing $50bn to $100bn a year to fund operating expenses. There is no historical precedent for what they're planning. www.wheresyoured.at/credit-crunch/

Debt markets aren't sentimental. They care about real numbers - true EBITDA - not ARR or fancy metrics designed to show profitability by excluding all the bad stuff. OpenAI and Anthropic will find them harder to fool than investors and reporters. www.wheresyoured.at/credit-crunch/

Credit agencies have never rated something like Anthropic or OpenAI, and based on my analysis, both are (outside of hyperscale guarantees for their debt) likely to get B or CCC+ junk ratings, which will be insufficient to raise even $50bn/year in debt. www.wheresyoured.at/credit-crunch/