As AI fever has propelled global stocks to record highs, the data centres needed to power the technology are increasingly being financed with debt, adding to concerns about the risks.
A UBS report last month said AI data centre and project financing deals surged to $125 billion so far this year, from $15 billion in the same period in 2024, with more supply from the sector expected to be pivotal for credit markets in 2026.
"Public and private credit seems to have become a major source of funding for AI investments, and its rapid growth raised some concerns," said Anton Dombrovskiy, fixed income portfolio specialist at T. Rowe Price.
"Although up until now an increase in supply has been met with relatively healthy demand, this is the area to watch especially taking into account large financing needs estimates," Dombrovskiy added.
The Bank of England warned last week that the growing role of debt in the AI infrastructure boom could heighten potential financial stability risks if valuations correct.
Christopher Kramer, portfolio manager and senior trader on Investment Grade Credit team at Neuberger told Reuters that the market has seen a structural shift as the largest technology companies finance their AI infrastructure ambitions.
"They really haven't been focal points in our market from a debt issuance standpoint, and that's obviously shifting really dramatically ... anytime you have that, it creates a lot of opportunity," he said on November 28.
"We're excited just from the standpoint that the market's changing. You're going to have a different dynamic, it creates an opportunity to take risks and create value for our investors," Kramer added.
