AI borrowing fuels private credit growth, but refinancing risks mount, Moody's warns
Moody's says AI-related borrowing is expanding private credit, but loans maturing in 2027–2029 could squeeze weaker borrowers refinancing at higher rates.
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what happened
Moody's Ratings said on Tuesday that heavy debt raised to build AI infrastructure is pushing private credit beyond its traditional corporate-lending base.
According to the agency, AI funding needs now reach past data centers into land, power, chips, GPUs and TPUs. Moody's sees the largest US hyperscalers together with CoreWeave spending close to $1 trillion in 2027, funded by operating cash, debt, and joint ventures, as well as special-purpose vehicles.
Moody's data show about 17% of the 607 borrowers it tracks use payment-in-kind interest, which lets them postpone cash interest while their debt keeps growing.
why it matters
A wave of maturities between 2027 and 2029 will test whether weaker borrowers can refinance at higher rates. A Reuters analysis earlier this year found that loan maturities at US business development companies peak in 2028 and 2029. Mounting stress in CoreWeave's debt has added to investor worries about heavily leveraged AI borrowers. Moody's also flagged circular financing, where tech firms invest in, lend to and buy from each other, so their exposures could weaken together in a downturn.
market impact
High-yield credit and BDCs: rising refinancing risk weighs on weaker borrowers.
- CoreWeave pressure down — stress in its debt heightens investor concern about leverage
- US BDC stocks pressure down — peak maturities in 2028-2029 raise the risk of loan defaults
tags
instruments
sources
- AI financing driving private credit growth as refinancing risks rise, Moody’s says — Reuters, 27 October 2026 at 14:45 UTC
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