AI companies have been hit by a dramatic bond sell-off as the sudden collapse of a £20bn data centre deal stokes fears about tech spending plans.

Bond prices have fallen sharply in recent days for companies building the vast networks of data centres needed to meet the AI plans of Silicon Valley giants.

It follows the decision by Firmus, an Australian technology business, to abandon a blockbuster public listing after investors baulked at the valuation it sought.

Guillaume Dejean, an analyst at Allianz Trade, said data centre company bonds were already under pressure from rising global borrowing costs and “events such as the Firmus failure accentuate risk-off sentiment”.

A report last week disclosing OpenAI’s projected revenues, which were lower than some had expected, has also prompted a pull-back in AI shares.

Firmus had been aiming to go public at a valuation as high as A$44bn (£23bn) and wanted to raise as much as A$7bn to build AI data centres across Australia and the Pacific.

It pulled the plug on the deal on Friday, blaming “recent market volatility and prevailing market conditions”.

The failed deal, which would have been Australia’s largest float – or initial public offering – in decades, has sent ripples through markets.

Bond prices at rival data centre companies plummeted on Monday and Tuesday after the deal fell through.

‘Yikes’

The price of some high-yield bonds at Coreweave, a $42bn (£32bn) US-listed AI data centre business, dropped from 85 cents on Friday to as low as 77 cents on Wednesday, a record low. Yields on some bonds climbed as high as 17pc.

A chart showing the company’s bond woes attracted the attention of Elon Musk, who simply posted “yikes” in a response on X.

Bond prices at data centre companies including Nebius and Terawulf also dropped sharply.

Mike Intrator, Coreweave’s chief executive, told staff on Wednesday that the market was acting “irrationally”, Bloomberg reported.

He said that “factors like the weakness and delays surrounding the attempted IPOs and debt financings” of rivals were “bleeding into the narrative around CoreWeave”.

Meanwhile, the cost of insuring against the risk of Coreweave failing to pay its debts, as measured by credit default swaps, climbed to a record high on Tuesday. Coreweave’s current debt stands at $35bn.

Shares in AI data centre businesses, dubbed “neoclouds” by industry watchers, plunged on Wednesday amid concerns over their ballooning debts.

Coreweave shares fell by as much as 16pc in New York, while Nebius dipped 10pc and Terawulf dropped by 7pc.

These companies have fuelled their growth through borrowing secured against promises from AI labs to rent future computing power from their proposed networks of data centres.

However, the financing relies on demand for AI services meeting ambitious projects. Several of these data centre operators have also raised funds on the back of non-binding deals with AI labs.

The failure of Firmus’s float has prompted questions over whether the deal was an isolated blunder, or a sign of wider unease about AI valuations.

‘Vision and chutzpah’

Firmus, which was backed by Nvidia, had attempted to raise funds at a valuation that was triple the price it had secured just two months ago. Bankers on the deal effusively praised the “vision and chutzpah” of the company’s founders, according to the Australian Financial Review.

However, it was forced to consider a sharp cut to its valuation after a tepid response from investors before cancelling the deal entirely.

Richard Windsor, a technology analyst at Radio Free Mobile, said management at the company appeared to have “shot themselves in the foot” by seeking an implausible valuation.

He added that the current sell-off hitting rival data centre companies appeared to have been driven by the “rising interest rate on government debt and general increasing nervousness about the AI roll out”, rather than the pulled float.

Yet the market turmoil will raise fresh questions for investors in the so-called “AI trade” ahead of Anthropic’s much-anticipated float, which could come as soon as November.

The Claude-developer’s listing is expected to attract a valuation as high as $2tn. Its main rival, OpenAI, has already pushed back its own listing until next year.

A float of Nscale, a UK-headquartered rival to Coreweave, is also in the works and expected to go ahead. It has been chasing a reported valuation of $35bn when it goes public in New York.

Across Wall Street, warnings are mounting over whether this debt-fuelled AI spending boom can be sustained.

Analysts at Gartner warned on Wednesday that some $3.5tn of AI infrastructure investment was at risk of being written down by 2030 as current consumer and corporate revenues from AI apps fails to keep up with projections.

Nvidia, the $5tn chip giant, has been a major backer of a number of these data centre companies, which in turn have bought Nvidia’s AI processors. It has fuelled concerns that circular financing has inflated an AI bubble.

Chris Wood, an analyst at Jefferies, warned last week that questions remained over whether Silicon Valley’s hundreds of billions in spending on AI infrastructure would make a return.

The “end game”, Mr Wood said, was the prospect of “massive capital destruction in the US”.

Jun Bei Liu, of fund manager Ten Cap, told Reuters that Firmus’s botched deal represented an “important reality check for the AI investment boom”.

However, he insisted: “I wouldn’t interpret it as the beginning of the end of the AI trade.”

Coreweave was contacted for comment.