Moody's: AI Financing Drives Growth in Private Credit Amid Refinancing Risks

Moody's Ratings stated that financing for artificial intelligence infrastructure is pushing private credit beyond traditional corporate lending. A significant amount of loans will mature in the coming years, and borrowers with weaker credit profiles may face refinancing difficulties. The demand for AI financing has expanded into sectors such as land, electricity, semiconductors, GPUs, and TPUs. Moody's expects that the total capital expenditure of the five largest hyperscale cloud service providers and CoreWeave will approach $1 trillion by 2027, with funding sources including operating cash flow, debt, joint ventures, and special purpose vehicles (SPVs). Moody's warns that loans maturing between 2027 and 2029 will test the refinancing capabilities of borrowers with weaker credit in a higher interest rate environment. Among the 607 borrowing companies tracked by Moody's, approximately 17% utilize payment-in-kind (PIK) interest, increasing their debt burden. Additionally, Moody's highlighted the risks of revolving financing, as inter-investment, lending, and procurement among technology companies, chip manufacturers, and AI developers are increasing; if the industry enters a downturn, these interconnected risk exposures may deteriorate simultaneously.

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