AI-related debt issuance reached $466 billion through September 2026, more than four times the $101 billion raised in the same period of 2025, according to Morgan Stanley data cited by IO Fund in an analysis published October 25. The money flows in a chain: lenders fund borrowers such as Oracle and CoreWeave, which buy chips from Nvidia and rent out computing capacity to customers. Reuters reporting corroborates the strain behind the figures, with CoreWeave’s bonds yielding around 15 to 16 percent and the cost of insuring its debt climbing past 1,000 basis points. Nvidia itself sits in a different position, paid upfront while its customers carry the debt.
How the debt chain works
Lenders fund borrowers such as Oracle, CoreWeave and SpaceX, which use the financing to buy chips from suppliers including Nvidia, IO Fund’s analysis explains. The borrowers then rent computing capacity to customers, while suppliers collect payment when chips are delivered. Goldman Sachs puts AI-related debt at $489 billion as of July 22, already above the $322 billion raised throughout 2025, according to the analysis. IO Fund also highlighted 14 circular financing arrangements identified by the International Monetary Fund across the wider GPU ecosystem, linking lenders, chip suppliers, infrastructure operators and AI customers. “AI compute is becoming a financeable infrastructure asset class,” IO Fund said.
Oracle’s burden is already visible
For Oracle, the debt burden is already visible in its financials, IO Fund stated. Oracle reported $125.3 billion in notes payable and borrowings in its first quarter, more than three times its $37.1 billion in cash and marketable securities. Quarterly interest expense rose 55 percent year over year to $1.43 billion. Oracle also carries $288 billion of new data center leases that have not yet started, with terms of 15 to 19 years. IO Fund said Oracle is reportedly considering an investor-funded entity that would purchase chips and lease them to the company, keeping the debt with the separate entity until the leases begin.
CoreWeave’s interest bill
For CoreWeave, the cost is direct. The neocloud generated $2.6 billion in second-quarter revenue while spending $9.4 billion on quarterly capital expenditure, most of it financed by debt, according to IO Fund. Its total debt reached about $35.6 billion, while its full-year 2026 capital spending guidance rose to $35 billion to $39 billion. Interest expense jumped 140 percent year over year to $640 million in the second quarter, and the company guided to $860 million to $940 million for the third quarter — more than 25 percent of its revenue going to service its debt, IO Fund wrote. About $15 billion of its debt falls due through 2028, while some higher-interest debt carrying rates above 10 percent is due in 2030 and beyond.
Reuters reporting corroborates the strain on a different tally: LSEG data puts CoreWeave’s debt at about $50 billion, its 2031 bonds yielding around 16 percent, and default insurance near 1,000 basis points in mid-October, rising to about 1,200 in a later roundup. Chief executive Mike Intrator told employees in a memo seen by Reuters that a $104.2 billion revenue backlog plus more than $25 billion in new commitments more than covers the obligations. Jensen Huang has said CoreWeave’s financial strength is improving, and Nvidia has agreed to buy unsold CoreWeave capacity through April 2032.
Nvidia sits on the other side
Nvidia itself occupies a different position in the chain. IO Fund noted Nvidia generated $127 billion in free cash flow over the 12 months ended July 2026, and has signed preliminary agreements with Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs and KKR targeting more than $500 billion in third-party capital. Chief executive Jensen Huang said Nvidia retains the option to backstop up to $125 billion across these structures. The asymmetry is the point: borrowers pay Nvidia and other chip suppliers upfront, while customer revenue arrives over multi-year contracts. Nvidia keeps expanding its physical AI footprint, including Nvidia’s physical AI hub plans in Kazakhstan, while hardware such as the DGX Spark desktop AI system keeps shipping. On Friday, Nvidia shares closed 0.6 percent lower, Oracle shares closed 0.5 percent higher, and CoreWeave shares fell more than 2 percent. Year to date, Nvidia is up 13 percent, Oracle is down 35 percent, and CoreWeave is down 24 percent.
Why It Matters
The debt matters because the question hanging over the AI buildout is shifting from whether customers want computing power to how the companies supplying it pay for the hardware. Reuters reporting frames the selloff as investors questioning how the buildout is funded rather than a collapse in appetite for AI computing. If demand holds and utilization rises, the borrowed capacity may pay for itself. If demand disappoints, the financing costs and fixed infrastructure commitments become harder to carry — and the companies holding the debt, not the chip supplier paid upfront, take the first hit.
Background
The neocloud model — borrow to buy graphics processors, then rent them out by the hour — grew up with the AI capacity race of 2025 and 2026, as hyperscalers and startups raced to secure chips and power. October brought the stress into the open: CoreWeave’s bonds slid to distressed levels, shares of CoreWeave, Nebius and IREN fell at least 30 percent during the month, Firmus pulled its IPO, Microsoft walked away from a UK lease with Nscale, and Oracle flagged problems in New Mexico, all reported by Reuters during October.
Source: IO Fund analysis via TradingView, Reuters
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