KKR warns AI borrowing could raise risks in credit markets

In short: KKR says the rush to borrow money for AI projects could make credit markets shakier if the AI boom slows.

What's going on

KKR, a large investment firm, warned that debt tied to AI is rising fast, and that investors may be taking on more AI-related risk than they realize. Credit markets are where companies borrow money through things like bonds and loans.

KKR says tech companies could spend nearly $8 trillion on AI infrastructure by 2030. This includes big items like data centers (warehouse-sized buildings full of computers) that power AI systems. KKR estimates AI-linked debt is about $600 billion today, which is roughly 6.3 percent of the US “investment-grade” bond market, a category that is usually considered safer.

KKR also warned that the real exposure could be larger because of off-balance-sheet financing, which is a way to take on obligations without listing them like a normal loan (similar to committing to long-term payments through leases and guarantees). KKR pointed to cases where some data center loans linked to Oracle have faced strain due to construction delays and permitting issues.

What to watch

KKR’s main concern is concentration, meaning many different investments may end up depending on the same AI growth story. If AI spending slows or projects run into problems, KKR says the knock-on effects could spread across the wider market. Investors may watch for higher interest rates demanded on AI-linked debt, more scrutiny of contract details like lease terms, and signs that big tech companies are reaching borrowing limits in the safer bond market.

Source: Financial Times