Banks move to offload AI data center debt they helped underwrite
According to Financial Times and Bloomberg reporting, JPMorgan, Morgan Stanley, SMBC and MUFG are exploring significant risk transfers and similar deals to shift the riskiest slices of AI data center loans to outside investors as they approach internal limits on exposure to a single sector. In one case, banks including JPMorgan and MUFG have spent more than six months trying to distribute $38 billion in construction debt tied to a Texas and Wisconsin data center project leased to Oracle, with some lenders willing to sell pieces to non-bank buyers at a discount. Oracle's five-year credit default swaps reportedly rose to around 151 basis points in early October, a level last seen in 2009, after S&P cut its rating to BBB- in July, while investors rotate toward data centers leased to investment-grade hyperscalers such as Microsoft and Google.
It signals that funding conditions for the AI data center buildout may be tightening, which could shape the pace and cost of future infrastructure expansion.