Credit Flows Into AI Projects Amid Bubble Worries

Credit investors are reportedly pumping billions into artificial intelligence (AI) efforts amid concerns about an industry bubble.

For example, there is a $22 billion-plus loan sale led by JPMorgan Chase and Mitsubishi UFJ Financial Group, Bloomberg News reported Saturday (Aug. 23). Sources with knowledge of the matter say that funding will help Vantage Data Centers’ plan to build a massive new campus.

Meta, meanwhile, is getting $29 billion from Pacific Investment Management and Blue Owl Capital for another gargantuan data center in rural Louisiana. More of these deals are expected, the report added, as OpenAI projects it will ultimately need trillions of dollars to develop the proper AI infrastructure.

This is all happening at a time when fears of an AI bubble are driving down tech stocks, with companies like Amazon, Apple, Google and Nvidia also seeing declines last week.

“Pundits pointed to two culprits: Comments by OpenAI CEO Sam Altman that AI could be in a bubble, and a report from MIT saying that 95% of companies it studied are getting “zero return” from generative AI,” PYMNTS wrote Friday (Aug. 22).

Altman had said he sees parallels between today’s scramble among investors to ride the AI wave, and the dot-com bubble in the late 1990s. Speaking about startup valuations during an interview, the CEO said “someone’s gonna get burned there.”

The situation has made credit watchers wary, the Bloomberg report added. Early efforts to build AI infrastructure were largely financed by companies themselves, such as Google and Meta. But more recently, that money has been coming more and more from private credit lenders and bond investors, the report said.

“Private credit funding of artificial intelligence is running at around $50 billion a quarter, at the low end, for the past three quarters,” Matthew Mish, head of credit strategy at UBS, told Bloomberg. “Even without factoring in the mega deals from Meta and Vantage, they are already providing two to three times what the public markets are providing.”

In other AI news, PYMNTS spoke last week with Discover® Network Director of Payments Innovation Kate Lybarger about efforts by businesses to both use this new technology, while also deploying in ways that align with evolving customer expectations and regulatory scrutiny.

Lybarger contended that AI isn’t a revolution for revolution’s sake. It’s a relatively new tool, although a powerful one, that must be employed precisely, transparently and responsibly.

“If you’re building anything with AI, nothing matters more than trust,” she said. “These solutions require a lot of data, potentially your customers’ information.”