Credit markets are funneling vast sums into artificial intelligence infrastructure even as prominent voices in tech and finance warn that returns may lag the hype. According to Yahoo Finance, lenders and investors are backing multi-billion-dollar data center projects and power buildouts while raising questions about the sustainability of spending.
Billions flow to data centers and AI infrastructure
JPMorgan Chase & Co. and Mitsubishi UFJ Financial Group are leading the sale of a loan exceeding $22 billion to fund Vantage Data Centers’ plan for a massive campus. Meta Platforms Inc. is set to receive $29 billion from Pacific Investment Management Co. and Blue Owl Capital Inc. for a large data center in rural Louisiana, the outlet reported.
OpenAI estimates it will need trillions of dollars over time for infrastructure to develop and run AI services. Early buildouts were largely funded by AI companies themselves, including Alphabet’s Google and Meta, but money is increasingly coming from bond investors and private credit lenders. Bloomberg Intelligence analysis cited by the report notes that many hyperscalers have financed projects with high-grade corporate debt supported by existing cash flows.
Private credit and CMBS take larger roles
Private credit funding tied to AI has been running around $50 billion a quarter at the low end for the past three quarters, said Matthew Mish, head of credit strategy at UBS, adding that private lenders are supplying two to three times what public markets are providing even before the biggest recent deals. Commercial mortgage-backed securities tied to AI infrastructure have also climbed, with JPMorgan estimating the amount has risen 30% this year to $15.6 billion.
Warnings of overbuild and uncertain payoffs
OpenAI CEO Sam Altman said he sees parallels between the AI investment frenzy and the late-1990s dot-com bubble and cautioned that “someone’s gonna get burned” on startup valuations. An MIT initiative reported that 95% of corporate generative AI projects have failed to yield profit, the report said.
Daniel Sorid, head of U.S. investment grade credit strategy at Citigroup, compared today’s dynamic to telecom overbuilds in the early 2000s and questioned medium-term sustainability. Utilities boosting borrowing to expand power infrastructure face particular risks, according to a Citi report. Ruth Yang, global head of private market analytics at S&P Global Ratings, said 20- to 30-year data center financings are being made despite limited visibility on five-year technology trajectories, prompting conservative cash flow assessments.
UBS noted rising payment-in-kind income in BDCs, reaching 6% in the second quarter, the highest since 2020. Yet lenders continue to deploy capital: John Medina of Moody’s said direct lenders view hyperscalers’ large capital needs as a long-term infrastructure opportunity.
