Moody's warns AI financing drives private credit growth, refinancing risks loom
Moody's Ratings says borrowing for AI infrastructure is expanding private credit, but warns a wave of loans maturing between 2027 and 2029 could test weaker borrowers' ability to refinance. Capital spending by top US hyperscalers and CoreWeave could reach nearly US$1 trillion by 2027.
HONG KONG — High levels of borrowing to fund artificial intelligence infrastructure are expanding private credit beyond traditional corporate lending, but a wave of loans coming due in the next few years could leave weaker borrowers struggling to refinance, Moody's Ratings said on Tuesday.
The ratings agency said AI financing needs now extend beyond data-centre construction to land, power, semiconductors, graphics processing units and tensor processing units. Moody's expects capital spending by the five largest US hyperscalers and CoreWeave to reach nearly US$1 trillion (HK$7.8 trillion) in 2027, financed through cash flows, debt and structures such as joint ventures and special-purpose vehicles.
However, a wave of loans coming due between 2027 and 2029 will test weaker borrowers' ability to refinance at higher interest rates, Moody's said. About 17 per cent of the 607 borrowers tracked by Moody's used payment-in-kind interest, which allows companies to defer cash interest payments but adds to their debt burden. A Reuters analysis earlier this year found loan maturities at US business development companies would peak in 2028 and 2029.
Recent stress in CoreWeave debt has also highlighted investors' growing concerns about highly leveraged AI borrowers, according to Moody's. The ratings agency also flagged "circular" financing risks as technology companies, chipmakers and AI developers increasingly invest in, lend to and buy from one another, raising fears that correlated exposures could weaken together during a downturn.