(Oct 27): High levels of borrowing to fund AI infrastructure is expanding 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.

Here are ​more details:

The ratings agency said AI financing needs now extend ​beyond data-center construction to land, power, semiconductors, ⁠graphics processing units and tensor processing units.

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 and structures such as joint ventures and special-purpose ​vehicles.

However, a wave of loans coming due between ​2027 and 2029 will test weaker borrowers’ ability to refinance ‌at ⁠higher interest rates, Moody’s said.

About 17% of the 607 borrowers tracked by Moody’s used payment-in-kind interest, which allows companies to defer cash interest payments but ​adds to ​their debt ⁠burden

A Reuters analysis earlier this year found loan maturities at US business development ​companies would peak in 2028 and 2029.

Recent ​stress in ⁠CoreWeave debt has also highlighted investors’ growing concerns about highly leveraged AI borrowers.

Moody's also flagged "circular" financing risks as ⁠technology ​companies, chipmakers and AI developers increasingly ​invest in, lend to and buy from one another, raising fears ​that correlated exposures could weaken together during a downturn.

Uploaded by Siow Chen Ming