The Latest Challenge to Data Centers? Restive Investors.

ImageAndrew here.We’re waiting on the jobs report this morning.

Here’s something perverse to consider: If the employment picture is better than expected, the Fed could raise interest rates — which might push down stock prices.Also: As interest rates climb, will the increasing cost of debt slow down the build-out of data centers? We’ve got a fascinating look at the implications below.Data centers versus the 10-year Political backlash against data centers and shortfalls in capacity to power them have weighed heavily on the infrastructure build-out for artificial intelligence.Now the industry is facing another challenge: soaring financing rates.The yield on the 10-year Treasury note traded at 5.22 percent on Friday after hitting a multi-decade high on Thursday.Higher borrowing costs are threatening the economics of A.I.

infrastructure development, Niko Gallogly reports.Step back: Morgan Stanley estimates that about $3 trillion will be spent on the A.I.build-out through 2028, with roughly half of that financed with debt or debt-like issuances.

To attract financing, issuers of A.I.-related debt must offer a premium over the yield on Treasuries.As Treasury yields rise, debt-financed projects will “need to meet a higher hurdle rate,” Vishal Merani, the managing director of digital infrastructure ratings at S&P Global Ratings, told DealBook.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access.If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe....