U.S. Treasury yields hit 5% as AI debt faces rising costs

U.S. Treasury yields have surged to levels not seen in two decades, with the 10-year yield exceeding 5.2% and the 30-year yield reaching 5.56%. This rise in interest rates is creating significant financial pressure on artificial intelligence (AI) companies that have relied heavily on debt to fund massive infrastructure investments.

JPMorgan Chase estimates that debt issued by AI-related companies, including data center operators, could reach approximately $4.1 trillion by 2030. As Treasury yields rise, corporations must offer even higher interest rates on their bonds to remain competitive for investor capital. This increases the cost of capital for the extensive upfront investments required for data centers, GPUs, and power infrastructure.

The impact of high interest rates is expected to vary by company scale. Major Big Tech firms such as Amazon, Google, Meta, and Microsoft possess significant cash flows and investment-grade credit ratings, allowing them to borrow relatively cheaply. In contrast, smaller neo-cloud providers that rely on external borrowing face much higher risks. For example, CoreWeave reported that every 1% increase in interest rates could raise its floating-rate debt interest expenses by roughly $30 million. Analysts suggest that as high rates persist, a widening gap will emerge between cash-rich tech giants and debt-dependent AI firms.