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Concern over AI data center debt is rising on Wall Street's list of potential credit threats, according to Bank of America $BAC +0.02%'s latest global fund manager survey, with a growing share of investors worried that the pace of financing could trigger the next market shock.
Concern about AI hyperscaler capital spending has surged among investors: In Bank of America's latest survey, conducted earlier this month, that category was named the most likely source of a future systemic credit event by about 34% of fund managers — twice the proportion recorded in April. At 42% of respondents, U.S. private credit held its position as the leading worry, even as that share fell from 57% the month before. The survey polled more than 150 participants between May 8 and May 14.
Since the start of last year, U.S. investors have channeled more than $300 billion in borrowing to tech companies financing AI spending, according to Bloomberg. Bankers anticipate that figure will keep climbing. The underlying anxiety centers on whether companies can ultimately justify borrowing at this scale for infrastructure whose revenue potential has yet to be proven.
Speaking on Bloomberg TV, De Boltz — JPMorgan $JPM -1.67% Chase's managing director of leveraged finance — described deal activity as having taken on a compounding momentum that is reshaping how lenders manage their balance sheets. "Everyone is working out where they're going to put that cash, and how much cash do they have to hold for these deals," De Boltz said. He added that lenders have grown more cautious about financing software companies that could be disrupted by AI, directing more capital instead toward businesses directly tied to the technology. "All of that cash is going into AI," he said.
