The junk bond market is offering AI data center builders a meaningfully better deal.
An Applied Digital subsidiary raised $1.59 billion in the high-yield bond market to fund a fourth building at its Polaris Forge 1 campus in North Dakota. The facility will deliver 150 megawatts of compute capacity under a 15-year contract with CoreWeave. Investors accepted a 7% yield - three percentage points below the 10% they had previously required for comparable AI infrastructure debt. That compression is notable in any bond market; in a high-yield context, it reads as a significant shift in perceived risk.
The repricing matters because debt markets tend to be more hard-nosed than equity markets about what a business is actually worth as collateral. When junk bond investors cut their required return by nearly a third, it suggests they now view a long-term AI compute contract with a named tenant as reliable income - not a speculative bet on a sector that may or may not pan out. Fifteen-year deals give lenders something concrete to underwrite.
The irony is that CoreWeave has drawn scrutiny for running on substantial debt and concentrating its customer base around a small number of large tenants. If bond markets are now pricing that counterparty risk down rather than up, either their confidence in sustained AI demand has hardened - or the next cycle of repricing just hasn't arrived yet.