AI companies are spending hundreds of billions of dollars building technology, and it's driving up inflation. The Fed's fix for that, higher interest rates, is probably going to hurt everybody but those companies. Howard Schneider explains

AI-related stocks tumbled globally in a selloff led by highly indebted data-center builders like CoreWeave. Michael Browne of Franklin Templeton told Reuters the rising cost of borrowing has led investors to offload AI companies' debt

AI DEBT FEARS SURGE AS TECH DEFAULT INSURANCE HITS RECORD HIGHS The cost of insuring against defaults by major U.S. tech companies has reached record highs as investors worry about AI spending, rising debt and higher interest rates. CoreWeave ($CRWV ) is under the most pressure, with credit markets pricing in an implied 63% probability of default within five years. Default insurance costs have also risen for Oracle ($ORCL ), Nvidia ($NVDA), Amazon ($AMZN), Alphabet ($GOOGL) and Meta ($META). The key concern: Investors are questioning whether AI companies can generate enough profits to repay their growing debts.

AI companies are promising a future where virtual employees handle entire jobs. But a former OpenAI researcher argues that today’s models are built to assist humans, not operate independently. Read more:

AI companies are promising a future where virtual employees handle entire jobs. But a former OpenAI researcher argues that today’s models are built to assist humans, not operate independently. Read more:

AI will become one of the largest spending categories in the US economy: AI services are projected to account for a record 8.8% of US GDP in 2032. This estimate shows how much businesses and consumers are expected to spend per year on the services of AI companies. This also implies AI companies would generate ~$3.5 trillion in annual revenue by 2032. By comparison, US consumer spending on food accounts for a similar 9.1% of GDP. This figure would also be ~72% higher than energy, at 5.1% of GDP, and twice the size of construction as well as computers and software, both at 4.4%. It would also be nearly 3x defense, at 2.8%, and more than 7x communications and internet, at 1.2% of GDP. The only category where spending is significantly larger is health, at 18% of GDP. The scale of the AI revolution is unlike anything seen before.