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I heard this somewhere on the internet and I can't wrap my head around it -
"A lot of data center buildouts are now getting paused, and these companies that are financing the buildouts have primarily financed them through debt. It's so much debt that it's kind of crowding out the US Treasury.
The US Treasury Secretary, Scott Bessent, is signaling that he will step in to calm down the Treasury market, but I think it's pretty important to understand the loop here.
When you build something big, you have to borrow. You sell a bond! The US government funds itself this way through bonds, and it's currently spending a whole lot more than it's taking in. At the same time that the US government desperately needs money, tech companies also desperately need money. They're selling IOUs hundreds of billions of dollars of them this year.
The main reason that bonds are selling off is because people are just worried about the direction that the United States is headed. It does not seem like the debt is going to be under control anytime soon.
So people are like, "Hey man, it just doesn't seem like you're very responsible. Like, why would we keep on giving you more money?"
There's also inflationary pressure, deficit pressure, and the AI companies are starting to look a bit worrying as well. A lot of people don't like data centers. They historically don't like things like that. I do think AI has been a mass marketing failure; I think it could have been a lot different.
And a lot of Americans agree. A year ago, Americans were split roughly 50/50 on having a data center built near them. Today, about three-quarters are opposed, and most of them are strongly opposed. It's the only thing that Americans seem to agree on.
So the entire loop here is: the AI companies got a little too excited, and they started borrowing a ton of money to try and build out data centers to meet all of the demand that was going to come from AI. So they start borrowing more and more and more. They end up crowding out the US government. The US government is already facing some headwinds due to Fed Chair Waller not being very open about forward guidance, as well as inflationary pressures due to the war in Iran and a budget deficit that just can't seem to close ever.
So all of a sudden, across the board, yields are hitting multi-decade highs, and then the whole bond market gets kind of nervous. What's happening in the bond market is both a function of what's happening with AI buildouts (and what's not being built) as well as the decisions of the US government to not be fiscally responsible.
The bond market is known for being the boss and took down Liz Truss before a head of lettuce rotted. So the bond market does seem to be in charge right now, and it is certainly signaling that it is not happy about what's unfolding."
TLDR: A lot of things happening in the market but No One Knows what's going to Happen!! So, certainly very interesting time ahead..