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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/

It gets worse. The previous lenders to AI megaprojects are becoming more risk-averse, meaning that any virgin data center project debt will be more expensive, and carry strict covenants to protect lenders. 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/

I know I've said this before, but OpenAI and Anthropic should not be allowed to go public. Nor should they be allowed to borrow from the open debt markets. They present an unacceptable risk to investors and lenders, and they need cash at a dangerous scale. www.wheresyoured.at/credit-crunch/

Microsoft, Google, Amazon and Oracle's entire future growth stories depend on Anthropic and OpenAI being able to pay them $500bn+ in the next three years, and Broadcom has existentially tied itself to $161bn in Anthropic leases. This is not sustainable. www.wheresyoured.at/credit-crunch/

This story has no happy ending. No last-minute rescue. This is nothing like the Dot-Com Bubble, Anthropic's losses and IPO are nothing like Amazon or Uber. 80% of Anthropic and OpenAI's revenues come from AI startups. It's all unsustainable. www.wheresyoured.at/credit-crunch/