The Industrial Revolution of Debt
The narrative surrounding Artificial Intelligence has shifted. What began as an equity story—dominated by soaring stock prices for chipmakers and software giants—has evolved into a massive credit event. The physical reality of AI requires steel, concrete, and gigawatts of power, and according to new data from JPMorgan, the bill for this build-out is projected to hit $5 trillion over the next five years. While equity grabs the headlines, it is the debt markets that must finance the shovel-ready reality.
We are witnessing a structural change in how Big Tech finances growth. As reported by Bloomberg and Reuters, AI project financing has surged to $125 billion this year alone, up from just $15 billion in 2024. This marks the beginning of a capital-intensive cycle where investment-grade bonds, private credit, and asset-backed securities (ABS) are being tapped simultaneously to feed an insatiable demand for data centers.
Hotspots and Hidden Leverage
The rush to build capacity is creating friction in the credit markets. While demand is robust, signs of overheating are emerging. Fortune reports instances of borrowers requesting loans covering 150% of construction costs, justified by projected future valuations—a classic signal of market froth. Meanwhile, legacy tech giants like Oracle are seeing volatility in their credit profiles, with Credit Default Swaps (CDS) spiking to levels not seen since 2009 as investors digest the sheer scale of the required capital expenditure.
Furthermore, the risk is being redistributed. A recent New York Times analysis highlights how major technology firms are utilizing "synthetic leases" and off-balance-sheet structures to push the risk of overcapacity onto smaller developers and their lenders. If demand for compute power softens, it is these smaller infrastructure holders—not the tech giants—who will be left holding the liability.
The Bond Capital View: Funding Assets, Not Hype
For mid-market borrowers involved in the infrastructure supply chain—from specialized construction firms to energy grid service providers—this environment presents a paradox. There is a flood of capital available, but it is increasingly bifurcated between "irrational exuberance" and regulatory caution.
What this means for your business:
- Asset-Backed Discipline: As fears of an AI bubble mount, lenders will retreat to quality. Capital will flow most readily to projects with tangible assets and secured contracts, rather than speculative valuation uplifts.
- The Private Credit Advantage: Morgan Stanley estimates that private credit markets could supply over half of the $1.5 trillion needed for data center expansion by 2028. This speaks to the flexibility of private lenders to underwrite complex, capital-heavy projects that traditional banks, constrained by regulatory caps, cannot service.
At Bond Capital, we distinguish between the speculative noise of the software layer and the tangible value of the infrastructure layer. We understand that the physical build-out of AI—the HVAC systems, the reinforced flooring, the power substations—requires flexible, patient capital. While the public markets worry about valuation multiples, we focus on the fundamental value of the steel and concrete that powers the future economy.
