The boom in AI investment increases competition for capital and the cost of government debt
Companies working in AI are borrowing trillions of dollars for data centers, competing with governments for capital in bond markets. The yield on US 10-year bonds rose to 5 %, its highest level in almost 20 years, with yields similarly rising in the UK and France.
Rising government bond yields, driven in part by competition from AI companies for capital, are pushing up benchmark interest rates in the economy, making financing more expensive for ordinary businesses as well through higher interest costs on loans.