The AI boom's next bottleneck is money, not chips

The AI boom is facing a new bottleneck, not chips, power, or memory, but money, according to recent reports. While tech giants like Anthropic prepare for massive IPOs and data centers continue to proliferate, lenders are becoming increasingly anxious about the financing behind this growth. The CEO of Singapore's largest bank, DBS, recently warned that supply shortages in chips and power are just the beginning, as capital shortages are on the horizon.

Major financiers of data centers have expressed their concerns, stating they would be happy to play their part if the risk-return math made sense. However, the reality is that it does not. Investors are becoming increasingly cautious, and deals that once were readily approved are now being subjected to tougher terms. This sentiment is echoed in the rising costs of policies to protect against SpaceX defaulting on its debt, as well as the higher price tag on a $40 billion loan for the rocket company, which is now being marketed at a 1 percentage point increase compared to its existing bonds.

While investors may be able to raise the $30 billion needed by OpenAI and the equity markets may recover from the recent chip selloff, it is essential to remember that telecom bonds began weakening six months before the dot-com crash, and subprime mortgage bonds peaked eight months before the S&P 500 did in 2007. For now, spending on AI infrastructure remains strong, with Goldman Sachs forecasting a $7.6 trillion boom through 2031.