Banks and Investors Grow Wary of AI Debt Amid Market Selloff

Bank and credit investors are increasing their scrutiny of AI-linked debt deals, refraining from expanding financing to borrowers amid recent market declines and shifting sentiment over the technology's growth trajectory.

Until a few weeks ago, some banks that were lining up to finance AI deals are communicating to market participants that they are reluctant to finance additional agreements, including those involving guarantees from the sector's leading tech companies. This credit pullback, based on banking and credit sources, was further intensified by the recent stock market decline on Thursday that erased $2.5 trillion in market value from the Nasdaq 100 index and pushed the index into a correction.

US midterm election results also heightened concerns that could lead to greater scrutiny over data centers, while a potential slowdown in data center construction could disrupt credit growth. According to Goldman Sachs Research projections, global hyperscale debt issuance is expected to exceed 60% above the $250 billion projected for fiscal year 2026, reaching $420 billion in 2027.