Moody's: AI Investments Expand Private Credit Market While Increasing Borrowing Risks

Moody's Ratings announced that high levels of borrowing used to finance AI infrastructure are pushing the private credit market beyond traditional corporate lending.

The rating agency emphasized that AI financing needs now extend beyond data center construction to encompass land, energy, semiconductors, and graphics processing units. Moody's projects that total capital expenditures for the top five US hyperscale tech companies and CoreWeave will reach approximately $1 trillion in 2027 through structures such as cash flows, borrowing, and joint ventures.

The agency warned that a heavy wave of debt maturing between 2027 and 2029 will strain the capacity of borrowers with weaker financial profiles to secure refinancing under high interest rates. It noted that about 17% of the 607 borrowers tracked by Moody's use the 'payment-in-kind' method, which allows for the postponement of cash interest payments but increases the debt burden.

Assessment: Moody's also drew attention to 'circular financing' risks arising from tech companies, chipmakers, and AI developers investing in, lending to, and purchasing from one another.