AI's $5 Trillion Cost Needs Every Debt Market, JPMorgan Says

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. From a report: 'The question is not 'which market will finance the AI-boom?' Rather, the question is 'how will financings be structured to access every capital market?'' according to strategists led by Tarek Hamid.

Leveraged finance is primed to provide around $150 billion over the next half decade, they said. Even with funding from the investment-grade and high-yield bond markets, as well as up to $40 billion per year in data-center securitizations, it will still be insufficient to meet demand, the strategists added. Private credit and governments could help cover a remaining $1.4 trillion funding gap, the report estimates. The bank calculates an at least $5 trillion tab that could climb as high as $7 trillion, singlehandedly driving a reacceleration in growth in the bond and syndicated loan markets, the strategists wrote in a report Monday. The analysts project $300 billion in high-grade bonds going toward AI data centers next year. That could account for nearly one fifth of total issuance in that market, which a report from Barclays estimates will grow to $1.6 trillion.

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