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Moody’s warns AI borrowing wave raises refinancing risks for weaker borrowers
About 17% of the 607 private credit borrowers Moody’s tracks use payment-in-kind interest, deferring cash payments while adding to debt.
Heavy borrowing to fund AI infrastructure is pushing private credit beyond traditional corporate lending, but a wave of loans coming due in the next few years could leave weaker borrowers struggling to refinance, Moody’s Ratings said on Tuesday, Reuters reported.
Moody’s expects capital spending by the five largest US hyperscalers and CoreWeave to reach nearly $1 trillion in 2027, financed through cash flows, debt, joint ventures and special-purpose vehicles. AI financing needs now extend beyond data center construction to land, power, semiconductors, GPUs and TPUs, the agency said.
Maturities cluster from 2027 to 2029
Loans maturing between 2027 and 2029 will test weaker borrowers’ ability to refinance at higher interest rates, Moody’s said. About 17% of the 607 borrowers it tracks use payment-in-kind interest, which defers cash interest but adds to the debt burden.
The agency also flagged “circular” financing risks as tech companies, chipmakers and AI developers increasingly invest in, lend to and buy from one another, raising fears that correlated exposures could weaken together in a downturn. Recent stress in CoreWeave’s debt has highlighted concerns about highly leveraged AI borrowers.