AI companies - with chip giant Nvidia as the industry leader - have lined up loan-financed projects to keep the AI pot boiling this summer.
“It will become more expensive for everyone to borrow”
This could soon become a headache for financially weak states and highly leveraged Swedish households or companies. The AI loans will be like fuel on the inflationary fire that is already building - as a result of concerns about inflation spread via higher energy and transport costs in the wake of the war in Iran.
There is a certain crowding-out effect here. It partly displaces other investments and partly reduces the ability of governments to finance themselves. This does not mean that governments cannot find bond buyers, but rather that they have to offer higher interest rates, says Jens Magnusson, chief economist at SEB.
It will be more expensive for everyone to borrow. There will simply be more competition for capital, he adds.
In addition to making life miserable for everyone in debt, higher interest rates also cast a wet blanket over the stock market. It drains households' savings and makes interest-bearing securities more attractive compared with risky stocks.
Chip factories and data centers
On Wednesday next week, fresh quarterly figures will be released by the American chip manufacturer Nvidia, headed by CEO Jensen Huang.
Ahead of the report, Nvidia has secured an agreement with a number of financial giants on Wall Street - including Goldman Sachs and BlackRock - to borrow at least $500 billion (equivalent to 4.8 trillion kronor) for the construction of new chip factories.
Nvidia has also recently secured a major order worth hundreds of billions of dollars for OpenAI and SB Energy's new giant data center project in Ohio, which will become one of the world's largest AI hubs, according to The Wall Street Journal.
Nvidia has set a cap of $105 billion for its investment in the Ohio project. It involves financial guarantees for the data center and the purchase of SB Energy shares for $1.5 billion, according to the agreement. In exchange, Nvidia will receive an agreement that gives the chipmaker exclusivity as a supplier of advanced chips.
The yield on ten-year Swedish government bonds - a benchmark in the market - rose to 3.08 percent on Tuesday. This is an increase of just over 0.40 percentage points since the end of June. German ten-year yields have also risen from 2.85 to 3.25 percent.
To find higher ten-year interest rates in Sweden and Germany, you have to go back to 2011.
In the United States, the yield on 30-year Treasury bonds peaked on Monday at 5.34 percent, the highest level since 2007.
Japanese and British long-term yields have also followed suit. In Japan, the 30-year yield peaked at 4.16 percent on Tuesday, close to a historic record. In the UK, the 10-year yield was at 5.86 percent at the same time.
Sources: Bloomberg, Financial Times
