Good morning. Andrew here. We’re waiting on the jobs report this morning. Here’s something perverse to consider: If the employment picture is better than expected, the Fed could raise interest rates — which might push down stock prices. Also: As interest rates climb, will the increasing cost of debt slow down the build-out of data centers? We’ve got a fascinating look at the implications below. (Was this newsletter forwarded to you? Sign up here.)
Data centers versus the 10-yearPolitical backlash against data centers and shortfalls in capacity to power them have weighed heavily on the infrastructure build-out for artificial intelligence. Now the industry is facing another challenge: soaring financing rates. The yield on the 10-year Treasury note traded at 5.22 percent this morning after hitting a multi-decade high yesterday. Higher borrowing costs are threatening the economics of A.I. infrastructure development, Niko Gallogly reports. Step back: Morgan Stanley estimates that about $3 trillion will be spent on the A.I. build-out through 2028, with roughly half of that financed with debt or debt-like issuances. To attract financing, issuers of A.I.-related debt must offer a premium over the yield on Treasuries. As Treasury yields rise, debt-financed projects will “need to meet a higher hurdle rate,” Vishal Merani, the managing director of digital infrastructure ratings at S&P Global Ratings, told DealBook. Financing costs are already climbing. For example, to fund the building of its giant Hyperion facility in Louisiana, Meta and its partner in the project, Blue Owl, sold $27 billion in bonds last year at a yield of 6.58 percent. But when a Meta-backed data center in El Paso went to the market in July, the bonds carried a 7.53 percent yield. Smaller players suffer. Debt issued for data centers tied to neoclouds — A.I. cloud computing providers — is seen as riskier than debt tied to tech giants like Microsoft or Meta. So neoclouds are facing “even more expensive” financing costs, Merani said. Take CoreWeave, a neocloud that went public last year. The company recently warned that interest payments on its floating-rate debt could rise by about $30 million a quarter for every percentage point increase in interest rates, based on the debt it held on June 30. Yields on some of Coreweave’s bonds have risen to close to 10 percent. Rising rates also put pressure on existing projects. Banks that take on data center debt routinely syndicate it to other lenders. With yields soaring, the market for such loans has grown more turbulent. In some cases, that’s putting pressure on banks to resell the debt at a discount, credit investors tell DealBook. Even worse: The issue is circular. The flood of corporate bonds, especially from A.I. hyperscalers, has increased competition for debt issuances overall. That’s helping drive up the yield on Treasuries.
Anthropic reportedly plans a mid-November I.P.O. The artificial intelligence giant is looking to go public before Thanksgiving and is set to meet prospective investors on Oct. 14, Bloomberg reports, citing unnamed sources. Investors say they believe a fair valuation of the company would be $1.8 trillion to $2 trillion, according to Bloomberg, despite growing A.I. security concerns. Elsewhere, Broadcom’s bankers are raising $60 billion to fund chips for Anthropic and others, Bloomberg reports, citing unnamed sources. David Ellison asks CNN’s boss to stay. Ellison, the Paramount C.E.O., is negotiating a deal with Mark Thompson to keep him as head of CNN after Paramount’s giant merger with Warner Bros. Discovery, the news network’s parent. Elsewhere, investors who bought debt to help fund that merger denounced Wall Street banks after the bonds plunged in value in their trading debut yesterday, Bloomberg reported, citing unnamed sources. Investors focus on this morning’s jobs report. Economists estimate that payrolls increased by about 90,000 last month and that the unemployment rate remained at 4.1 percent. Inflation hawks will be paying special attention to any uptick in wages data.
A bruising runInvestors are growing impatient with Nike. Shares in the sportswear giant are down more than 9 percent in premarket trading after the company reported disappointing quarterly results yesterday evening and predicted tougher times ahead. The pressure is mounting on Elliott Hill, Nike’s C.E.O., who came out of retirement two years ago and unveiled a turnaround plan that is so far failing to win over either customers or Wall Street. Hill told analysts yesterday that the company would cut jobs and restructure global operations as a sharp slowdown in its China business and softer sales for its Jordan and Nike Sportswear brands would weigh on growth for several more quarters. Hill faces big challenges:
And then there’s the Greater China region, once a major growth engine. Revenues dropped by roughly 26 percent there last quarter, the company said, adding that more rough times in that market lay ahead.
Shares in Nike are down over 45 percent this year, on pace for the company’s worst year on record. One bright spot was its North America business, which continued to grow thanks to a World Cup effect. The latest Silicon Valley talent warSilicon Valley has seen its share of fierce rivalries over the years — think Intel versus AMD, Uber versus Lyft, OpenAI versus Anthropic. Now, a feud between the coding start-ups Factory and Cognition is playing out publicly on social media, with executives hurling mud at each other. The fight underscores the intense battle for talent and for a business edge in the high-stakes artificial intelligence race, Sri Muppidi reports. The first shot: In an X post, Matan Grinberg, the C.E.O. of Factory, wrote that his company had terminated its relationship with Chris Degnan, a former executive at Snowflake who had been advising the company and who had attended board meetings. Grinberg accused Degnan of “unethical conduct involving Cognition,” specifically that he had shared confidential information. Grinberg added: “We do not know the extent of the information he shared, but it puts his timely questions about our product roadmap and what the parity gap involves into a new light.” Cognition dismissed Grinberg’s claim. “We have no interest in Factory’s info and Chris has never brought it up,” Scott Wu, Cognition’s C.E.O., wrote on X. Paul Grewal, Cognition’s chief legal and global affairs officer, told DealBook in a statement that his company had hired Degnan because “he is widely known as one of the world’s best sales leaders,” having built Snowflake into a multibillion-dollar business. There’s long been a revolving door for talent among tech companies. In 2005, Steve Jobs of Apple told Bruce Chizen, then the C.E.O. of Adobe: “Adobe is recruiting from Apple. They have hired one person already and are calling lots more. I have a standing policy with our recruiters that we don’t recruit from Adobe. It seems you have a different policy. One of us must change our policy. Please let me know who.” It’s only gotten worse as the stakes of the A.I. boom increase. Researchers, for instance, have bounced around between OpenAI, Anthropic, Google and Meta, among others. A big draw are the enormous paychecks, sometimes worth hundreds of millions.
But Khosla Ventures is also invested in Factory — another sign of how investors are increasingly backing competitors in the A.I. race. OpenAI and Anthropic, for instance, share at least 95 investors. CHART OF THE DAY
House hunters have been dealt another blow as the average 30-year fixed-rate mortgage rose this week to 7.28 percent, the highest level since 2023. Soaring financing costs are chilling the property market. An A.I. database start-up gets a funding boostArtificial intelligence agents are generating vast amounts of data as they take on more coding tasks. But storing the information is an issue. Supabase, a database software company, is looking to capitalize on that opportunity. Today, the six-year-old start-up is announcing $150 million in funding that values the company at $10.65 billion, Sri Muppidi is first to report. The financing adds to the $500 million the company raised in June. Singapore’s sovereign wealth fund, G.I.C., led the $150 million round. CapitalG, IronArc and SquarePeg also participated. Supabase’s business is booming as agentic coding takes off. The company is adding nearly five million databases per month to the platform, and about 70 percent of those are created by A.I. tools. “Software is increasingly written by A.I., not just people. And when an A.I. tool builds an app, it has to pick a database, right?” said Derek Zanutto, a general partner at CapitalG. Supabase has more than 500,000 paying customers. The company targets start-ups tied to YCombinator, the prominent accelerator that also helped Supabase grow. Supabase is free to start. But the company charges customers up to $599 per month depending on their usage needs. There are payment plans for enterprise users, too.
The start-up’s revenue is expected to grow more than fourfold this year, according to Paul Copplestone, Supabase’s C.E.O. He declined to disclose specific figures. Supabase is also announcing that it is acquiring Turso, a database company. Copplestone says Supabase will unveil a new offering using Turso’s technology that will enable users and agents to build prototype versions of software in a low-cost way. Supabase is not disclosing the terms of the deal. There are security concerns. In a recent report, the cybersecurity firm UpGuard said it had identified more than 16,000 databases hosted on Supabase in which some sensitive data was exposed. Such breaches are especially worrisome as A.I. agents are increasingly going rogue and hacking into third-party websites. Bil Harmer, Supabase’s chief information security officer, said in a statement that the company provided “secure defaults and tooling” but that customers managed their own security configurations. (TechCrunch first reported details of the data exposures.) We hope you’ve enjoyed this newsletter, which is made possible through subscriber support. Subscribe to The New York Times.
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