Banks pump the brakes on AI debt after Nasdaq rout burns $2.5T

Banks and credit investors are rethinking their exposure to AI debt, and the turn has been fast. Several banking and credit sources say lenders that were recently queuing up to finance AI deals now tell market participants they would hesitate to sign off on more — even when the sector's biggest names stand behind the guarantees. Two sources put the shift at just the past few days, with Anthropic and Google cited among the backstops lenders are wary of. Both companies declined to comment.

The trigger was a brutal stretch for stocks. The Nasdaq 100 shed $2.5 trillion in market value on Thursday and slid into a correction, souring sentiment on how fast AI will actually grow. Midterm election results piled on, stoking worry about tighter oversight of data centers. If construction slows, banks lose loan growth and the investment banking fees that come from bond sales and stock offerings.

The enthusiasm that defined the past year has curdled, said Chris Poggi, a finance partner at Ropes & Gray, who described unbridled appetite for lending to neoclouds and anyone building data centers or AI assets. Lenders' books are full, he said, and they are now deciding whether they have already stretched as far as they will this year. Supply isn't shrinking, though: Goldman Sachs Research sees global hyperscaler debt issuance hitting $420 billion in 2027, up more than 60% from its $250 billion estimate for fiscal 2026.

JPMorgan's own numbers show how crowded the trade has become. Loans backed by income-producing properties, a bucket that includes data centers, sat at $29 billion outstanding at the end of the third quarter — the bank's second-largest commercial real estate exposure at 12%, behind only apartment buildings. Three years ago that category was just 8% and ranked fourth, behind apartments, industrial and office. JPMorgan declined to comment.

Investors are getting pickier too. The spread on 10-year hyperscaler debt has widened by roughly 50 basis points this year, versus about 20 basis points for high-quality industrial companies with no AI ties, according to Bank of America credit analyst Yuri Seliger. Bonds Meta issued earlier this year and SpaceX paper are trading below par. In Asia, OCBC Group CEO Tan Teck Long said Friday that his bank structures deals tightly around cash flow to keep risk in check.

Riskier borrowers are feeling it hardest. Baird Equity Research flags Oracle and CoreWeave as neoclouds exposed to possible construction delays or moratoriums — CoreWeave's stock is down 35% this year and its bonds have slumped on the secondary market. Nebius had been exploring a high-yield bond in September but shelved the plan last month, according to one source familiar with the matter; the company, which locked in a $3.5 billion senior secured loan from Citigroup in October, did not respond to a Reuters request for comment. Jay Bala, co-founder and CEO of $300 million alternative asset manager AIP, expects most banks and credit investors to wait and see how AI fares after the Democratic sweep of Congress.