Banks balk at AI debt even with Anthropic, Google backing

Some banks that were competing to fund artificial intelligence deals only weeks ago now say they would be reluctant to finance more of them. That holds even for deals guaranteed by the sector's biggest names, Reuters Thomson Reuters Corporation ↘ 3.79% reported on Monday, November 9, citing several banking and credit sources. Two of those sources said the change came in just the past few days. Some lenders have hesitated even when a deal is backstopped by Anthropic or Google Alphabet Inc. ↗ 0.73%, the sources said, though they did not name the lenders. Anthropic and Google declined to comment.reuters.com

According to Reuters, the pullback got worse after Thursday's selloff, which erased $2.5 trillion in market value from the Nasdaq 100 and pushed the index into a correction. The midterm election results have also added to worries about tighter oversight of data centers.reuters.com

Full books, closer scrutiny

"Debt investors' books have become full and now they are assessing if they have extended themselves as much as they're going to extend themselves this year," Chris Poggi, a finance partner at Ropes & Gray, told Reuters. Lenders are stress-testing cash flows against a possible downturn. They are also looking closely at when large tech customers could cut back or end their commitments.reuters.com

The pullback has been sharpest for riskier borrowers such as neoclouds and standalone data center operators, Reuters reported. Nebius ↗ 9.24% explored a high-yield bond in September but dropped the plan last month. Bonds from Meta ↗ 5.12% and SpaceX are trading below par. Bank of America ↗ 2.29% analyst Yuri Seliger said 10-year hyperscaler spreads have widened about 50 basis points this year, compared with roughly 20 for high-quality industrial companies not tied to AI.reuters.com

Bank exposure is also growing. At JPMorgan Chase ↗ 2.27%, the loan category that includes data centers reached $29 billion at the end of the third quarter. That is 12% of the bank's commercial real estate book, up from 8% three years ago, Reuters noted.reuters.com

Software debt needs a discount

Software debt is also hard to sell. Banks led by JPMorgan could offer one of the year's biggest discounts to sell part of the $5 billion in debt for Qualtrics International that underwriters were left holding a few months ago, Bloomberg reported. The debt funds Qualtrics' purchase of Press Ganey Forsta. Earlier this year, worries that AI could disrupt software companies scared off lenders, and the banks had to fund the deal themselves, Quartz reported.bloomberg.com+1

A more upbeat Wall Street view

Not every bank sees it the same way. Goldman Sachs ↗ 4.67% CEO David Solomon told CNBC Comcast Corporation ↗ 0.49% that "there's still very strong demand for investments in the AI infrastructure build," and said Goldman has been "very active" in recent deals, CNBC reported.cnbc.com

Borrowing needs keep climbing either way. Goldman Sachs Research projects global hyperscaler debt issuance will reach $420 billion in 2027, up from an estimated $250 billion in 2026, according to Reuters. "Most banks and credit investors will take a wait and see approach," said Jay Bala, CEO of the asset manager AIP.reuters.com