AI Data Centers are becoming the new Subprime Housing market. Banks are packaging up risky loans and selling them off to other investors.
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Data center debt has exploded due to the AI boom, with $25.4 billion in US secured debt issued in 2025 alone, marking a 112% increase from 2024’s $12 billion. Since 2022, this issuance has grown by an astonishing 1,854%. This surge is driven by the massive capital requirements of AI infrastructure, as hyperscale data centers with advanced GPUs demand billions in upfront investment for power, cooling, and networking.
Major tech companies like Meta, Oracle, and Alphabet have borrowed heavily, issuing $75 billion in bonds and loans in just September and October 2025—more than double the sector’s annual average from 2015 to 2024. Industry-wide, data center asset-backed securities and commercial mortgage-backed securities total about $49 billion outstanding. Morgan Stanley projects that AI-related data center spending will reach $2.9 trillion cumulatively from 2025 to 2028, with roughly half requiring external financing.
The pace of capital expenditures in AI data centers now stretches the limits of what company cash flows can support; in 2025 and 2026, AI capex is expected to consume up to 94% of operating cash flow minus dividends and buybacks, up from 76% in 2024, forcing companies to increasingly rely on debt markets.
Soaring optimism about AI has set off a huge global boom in data center construction that could be storing up problems for the future if the sector suffers a sudden correction.
That’s the thinly-disguised message from two interventions by the Bank of England, the UK’s central bank, last week. The first was an analysis, published on Friday, that examines how AI is creating deeper financial dependencies across the tech sector and beyond.
At the heart of this are data centers, the element on which the whole AI economy depends. AI needs a lot of them, which will cost $5.2 trillion worldwide by 2030 to build, according to McKinsey. The bank suspects that meeting this demand will increasingly involve companies taking on extra debt, which is where its anxiety starts to rise.
(Bloomberg) — The furious push by AI hyperscalers to build out data centers will need about $1.5 trillion of investment-grade bonds over the next five years and extensive funding from every other corner of the market, according to an analysis by JPMorgan Chase & Co.
https://finance.yahoo.com/news/ai-5-trillion-data-center-165808446.html