The $10 Trillion Capital Call
The artificial intelligence revolution is no longer just a software story; it has mutated into one of the largest physical construction projects in history. Major tech conglomerates—often referred to as hyperscalers—are currently flooding the bond market to fund a physical build-out estimated to cost upwards of $10 trillion over the next decade. In the fourth quarter of 2025 alone, hyperscalers including Alphabet, Meta, and Amazon issued nearly $90 billion in public debt to finance data centers, signaling a pivotal shift from cash-funded growth to leverage-driven expansion.
While equity markets obsess over valuation multiples, the credit markets are absorbing the shock of concrete, steel, and power generation costs. The scale of this spending is forcing even the most cash-rich companies in the world to seek outside capital, creating a chaotic environment where liquidity is abundant yet increasingly priced for perfection.
The Rise of “Shadow” Leverage
As balance sheets swell, sophisticated borrowers are turning to financial engineering to disguise their true leverage. We are witnessing a surge in off-balance sheet financing and synthetic leases, designed to keep massive liabilities effectively invisible to casual observers.
- The Meta Precedent: Meta recently secured approximately $30 billion in financing for a Louisiana data center through a special purpose vehicle (SPV), allowing them to build without directly recognizing the debt.
- Risk Transfer: Banks are reacting to this concentration risk. Institutions like Morgan Stanley are actively exploring “Significant Risk Transfers” (SRTs) to offload their data center loans to private investors, fearing overexposure to a single asset class.
- Valuation Friction: The market is seeing signs of froth, with some developers requesting loans valuing 150% of construction costs based on projected future rents—a classic signal of market overheating.
The Bond Capital Perspective
The physical build-out of AI requires massive capital, but the current lending frenzy has introduced volatility into the banking sector. As regulators fearing a “glut” begin to scrutinize bank exposure to data centers, traditional lenders may tighten their credit boxes or demand increasingly complex covenants.
For mid-market borrowers and infrastructure developers, this signals a need for certainty over speculation. While equity grabs headlines, debt finances the steel and concrete. At Bond Capital, we look past the valuation hype of the software layer and focus on the fundamental value of the physical assets. As banks engage in financial gymnastics to manage their regulatory capital, private credit remains the stable mechanism for financing complex CapEx needs without the opacity of synthetic structuring.
