The $3 trillion AI datacenter boom is facing a $1.5tn “funding gap” that is being filled by “shadow banking,” creating a “structural risk to the overall global economy.” This “speculative” debt, which has “raised the alarm” at the Bank of England, is financing “unproven” assets.
This “private credit” sector is “eager to deploy capital into AI,” and analysts warn they “may not be properly assessing the risks.” They are funding projects “without their own customers,” built on “very quickly depreciating assets.” Meta has already tapped this market for $29bn.
This $1.5tn in risky debt is financing the “exuberance” that “will backfire.” It is happening while an MIT study shows 95% of firms are getting “zero return” on AI pilots, questioning who will pay for this new capacity.
Gil Luria of DA Davidson warns that if this “influx of debt capital… rises to the level of hundreds of billions of dollars,” its failure “could end up representing structural risk.”
While the “healthy” boom, funded by Google’s $100bn quarters, continues, it is being shadowed by a “speculative” bubble. The $3tn AI boom is therefore dangerously exposed to a $1.5tn debt bomb circulating in the “shadows” of the financial system.