- Wall Street is funding the AI build-out through several ways.
- Spending on data centres and AI infrastructure by four big companies in 2026 is reportedly more than $670 billion.
- The spending has sparked questions about the sustainability of funding AI firms
Artificial intelligence is the new craze on Wall Street, with investors doing everything possible to fund companies.
Be it OpenAI and Anthropic announcing their decision to file initial public offerings (IPOs) soon or Google parent Alphabet's $85 billion equity raise, every move by tech firms has investors eager to spend their money.
The fundraising has supported markets and powered technological advancements, but questions remain on the sustainability of the AI build-out.
Many investors think that the AI build-out could get messy, the Wall Street Journal reported, with overspending by firms and markets later weeding out the losers. Increased equity issuance could also put pressure on stocks by diluting shareholders, which WSJ cited as a possible factor for last week's tech selloff.
However, demand for AI and tech stocks continues, with technology shares in the S&P 500 up by 31% this quarter.
Spending on data centres and AI infrastructure by only four big companies this year is reportedly over $670 billion, which is larger as a share of the economy even in comparison to the railroad expansion of the 1850s.
With the surge in spending, tech giants such as Amazon and Alphabet are issuing bonds in not just US dollars, but also euros and Swiss francs and Canadian dollars.
This scale of spending has raised worries that Wall Street could be inflating a bubble. Questions are also being raised on how profitable maintaining the products at the heart of the AI sector - OpenAI's ChatGPT, Anthropic's Claude and Alphabet's Gemini - could be.
Optimism about monetisation of AI models has grown with the rise of Anthropic. The Claude maker is set to double its revenue in the second quarter to $10.9 billion, meaning its revenue will exceed, at least temporarily, the cost of training and running its AI models.
Both Anthropic and OpenAI are set to launch their IPOs later this year, and the public issues are expected to be near a trillion-dollar valuation, as per reports.
Investor sentiment has been positive even more for CoreWeave, a former bitcoin miner turned AI cloud-computing provider. Last year, the company's ability to borrow in the bond market was doubtful after a big selloff in its shares and bonds.
This year, CoreWeave's stock has jumped 43%.
The company, which leases data centres to Meta and OpenAI, is also engaging with European high-yield investors as it looks into new financing options that may include US dollar and euro bonds, Bloomberg reported.
The potential debt issuance highlights that while skepticism may remain about the AI build-out, investors are not done funnelling money into it.
