Moody's: AI financing drives private credit growth, refinancing risks rise

BlockBeats news, October 28 - According to Reuters, Moody's Ratings said on Tuesday that massive borrowing to fund AI infrastructure buildout is pushing private credit beyond traditional corporate lending. But a large volume of loans will mature in the coming years, and weaker borrowers may face refinancing difficulties at that time.

Specifically, AI financing demand has expanded from data center construction to areas such as land, power, semiconductors, graphics processing units (GPUs), and tensor processing units (TPUs). Moody's expects the total capital expenditure of the five major U.S. hyperscalers and CoreWeave in 2027 to approach $1 trillion, with funding sources including operating cash flow, debt, and financing structures such as joint ventures and special purpose vehicles (SPVs).

Moody's warned that loans maturing in concentrated fashion between 2027 and 2029 will test weaker borrowers' ability to refinance in a higher interest rate environment. Among the 607 borrowing companies tracked by Moody's, about 17% use payment-in-kind (PIK) interest arrangements, deferring cash interest payments and adding interest to debt, thereby further increasing the debt burden.

In addition, Moody's also flagged the risk of "circular financing." As mutual investment, lending, and procurement among tech companies, chipmakers, and AI developers continue to increase, once the industry enters a downturn, these interconnected risk exposures could deteriorate simultaneously.