AI Data Center Debt Is Showing Up Everywhere

Debt financing for data centers and related infrastructure has grown rapidly enough that it’s become its own category these days—credit analysts are breaking out AI versus non–AI-linked debt across markets to analyze new issuance and performance. Several asset managers in recent months have filed to create exchange-traded funds focused on AI or AI infrastructure–related debt.

And right now, parts of this category aren’t doing so hot. In case you missed it, our own Dakin Campbell did a deep dive earlier this week on the cracks showing up in various financing markets fueling the AI build-out.

There’s a lot going on, from wider spreads on tech giants’ corporate debt in the investment-grade market; to investors demanding bigger concessions in recent bonds for AI data center projects in the high-yield market; to skittishness in the bank loan market for AI project financing. Investors are getting choosier and taking a harder look at project-specific construction and other risks.

Zeroing in on the high-yield market in particular, there’s a group of bonds that anyone with an interest in the AI build-out should be keeping an eye on. Overall, there have been at least 20 high-yield bond deals financing data center projects over the past 12 months, according to The Information’s story this week. The companies behind these projects, such as CleanSpark or TeraWulf, are hardly household names, and the project debt is often issued through even more obscure special purpose entities.

But if you do a little digging, many of the biggest names in AI show up connected to these data center projects in some form, as direct tenants, customers of the tenants or providing some kind of credit support to get the financing done. That means markets for lower-rated issuers are financing at least some of the infrastructure supporting the biggest AI companies. (These deals generally finance the data center buildings and related infrastructure; they typically don’t finance the chips that go inside the data centers.)

For instance, multiple project deals over the past year are for data centers leased to CoreWeave, which in turn counts Microsoft, Meta Platforms and OpenAI among its customers. One CoreWeave-related project financing is for two data centers where CoreWeave leases one and Alibaba Cloud leases the other. And that’s a more obvious connection than some of the rest.

Several project financings are for space leased by AI infrastructure startup Fluidstack, with Google backing certain Fluidstack lease obligations. Fluidstack has been building and securing data centers for Anthropic, among others. Anthropic, meanwhile, has been dramatically expanding its use of Google’s TPU chips.

Then there are two Nevada bond financings issued through special purpose entities, SV RNO Property Owner 1 LLC and PR RNO Property Owner 1 LLC. Fleet Data Centers, a portfolio company of asset manager Tract Capital, is developing both projects. Credit ratings reports for both described long-term leases to an unnamed investment-grade tenant—a May report noted the anonymous tenant had a more than $3 trillion market cap—which Bloomberg has previously reported is Nvidia in both cases.

Nvidia has been increasingly securing data center capacity itself, both for its own use and to help customers secure capacity. Nvidia disclosed in August that it had $25 billion of not-yet-commenced data center lease commitments, mostly for its own use like product design and testing, and another $20 billion of future data center lease commitments that it plans to reassign to third parties.

There’ve also been bond deals tied to data centers leased by Amazon and Oracle. And one for SB Energy’s Cosmos campus in Texas, where a SoftBank Group affiliate guarantees the tenant’s obligations under the lease, SB Energy’s initial public offering paperwork shows. As Dakin reported earlier this week, one of the most recent project bonds was a financing for a CleanSpark project for Meta.

While there are some proposed dedicated funds for AI-related debt, many of these project financings have already worked their way into broader funds. That makes sense, as data center project debt itself has had a growing presence in the overall high-yield market. For instance, high-yield bond exchange-traded funds from asset managers including State Street and Charles Schwab count debt tied to Fluidstack-leased data centers and one of Fleet’s Nevada projects among their top holdings. To be sure, those are small slices—less than 1% each—of the overall ETFs, which hold debt across a wide range of sectors.

In other words, even though it has become its own category in some ways, the AI debt boom has become tougher to avoid in general. Either way, it’s worth paying attention to who’s doing these financings and whom the data center capacity is really for—and how the next deals coming to market fare.