2026 AI Data Center Company Issued Debt Is Almost 50% Junk Bonds

Nearly half of AI data center debt issued in 2026 is rated high risk (junk category). These bonds generally yield market rates today between 7% and 16%. So if data center company A's bonds yield 15%, then any new debt will probably be priced at 15% or above unless the debt has special features like collateral or equity conversion options. Yet the stock market is valuing these companies much more generously than their bond market counterparts despite persistent net income or net operating losses.

Who do you trust? Well, the bond market is an income and risk calculation machine. It is not susceptible to fads or hero worship. Risk miscalculations are possible, but corrected immediately as new information arrives. In contrast, Warren Buffett has noted that short run the stock market is a voting machine and long term a calculating machine. So popularity dominates short term, but long term the wealth created is the sole consideration (present value of net operating cash flow). Hence a wide divergence between how the bond and stock markets value a company is an alarm bell that the stock price is deviating from true worth. In general the stock market has two types of investors, sophisticated level headed investors who are forward looking, and dumb, copy cat investors who always late to the party, buy at the top, and sell at the bottom. Dumb investors can be very smart and successful in their lives, but still terrible in their investments due to herd-like behavior. 

For full details, https://www.forbes.com/sites/giacomotognini/2026/10/16/why-debt-laden-neoclouds-could-become-a-trillion-dollar-wework-20/. 

Screenshot of Forbes Article On Junk Bond Dominating AI Data Center Issues



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