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Moody's warns pensions face AI capex risk amid uncertain payoffs
Moody's Ratings flags a lack of a clear roadmap for the large debt-backed capex plans, as financing for major AI data hubs and capacity expansions has reached tens of billions.
Moody's Ratings warned that some pensions could be exposed to risk from the current AI buildout, pointing to what it describes as “no playbook” for how the scale of capital spending will translate into tangible returns, according to a Yahoo Finance summary of Moody's remarks. The concern centers on the role of debt funding behind the massive investments in chips, data facilities, and power generation tied to AI growth.
The piece notes that funding for AI initiatives has been heavily debt financed, and it cites examples of recent large transactions. Morgan Stanley is described as structuring tens of billions of dollars in bonds and other strategies to support startups and large projects, including $27 billion in debt financing for Meta's data hub and another $35 billion for Broadcom to expand capacity.
It also highlights a deal involving Google and Terawulf, described as a multi-billion contract where Morgan Stanley acted as a guarantor tied to $3.2 billion in leases and received an equity stake, while Google’s participation reportedly drew more than three times the target demand for speculative low grade bonds.
According to the summary, the lenders of last resort in the “hyperscaler bond blitz” include insurance companies and pension funds, with the article adding that tech is propping up the S&P 500, comprising more than 50% of the index.
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