AI Private Credit Risks Rise as Infrastructure Borrowing Expands, Moody's Warns

AI private credit risks are increasing as technology companies expand borrowing to finance artificial intelligence infrastructure, according to Moody's Ratings.

The credit rating agency warned that growing financing requirements were pushing private credit beyond traditional corporate lending into increasingly complex investment structures.

Capital expenditure by the five largest US hyperscalers and CoreWeave is expected to approach USD1tr in 2027, supported by operating cash flows, debt and arrangements including joint ventures and special-purpose vehicles.

Moody's also highlighted refinancing pressures as a substantial volume of private credit loans approaches maturity between 2027 and 2029.

Among 607 borrowers tracked by the agency, 17% used payment-in-kind interest arrangements, allowing them to defer cash interest payments while increasing outstanding debt.

The agency warned that interconnected financing relationships among technology companies, semiconductor manufacturers and AI developers could amplify losses during a market downturn.

For family offices and institutional investors, the findings underline the importance of evaluating credit quality, refinancing exposure and concentration risks in AI-related private debt investments.