Morgan Stanley leads Wall Street in AI data center debt deals

In short: Morgan Stanley has become the leading Wall Street bank for arranging debt deals that fund AI data centers, helped by financing structures backed by Big Tech companies.

What's going on

Morgan Stanley is increasingly advising on large debt and equity deals that pay for the physical build-out behind AI, especially data centers. Data centers are the large buildings full of computers that run AI services, similar to power plants but for computing.

The Financial Times reports that Morgan Stanley worked on several major financings, including a $3.2 billion bond for data center developer TeraWulf that was backed by Google. It also advised on a $27 billion debt package linked to a Meta data center project with Blue Owl, and a $35 billion chip financing deal for Broadcom.

This deal flow helped Morgan Stanley move ahead of Goldman Sachs in the first half of the year for debt and equity capital markets fees. LSEG data cited by the FT shows Morgan Stanley earned $2.3 billion in those fees, up from $1.4 billion a year earlier. It ranked second globally, behind JPMorgan Chase.

A key part of the trend is that banks are packaging long-term contracts from Big Tech companies into investments that more mainstream investors can buy. Think of it like a landlord with a very reliable tenant, then using that lease to borrow money more cheaply. When Google, Amazon, Meta, or Microsoft guarantee a data center lease, the borrowing cost can drop sharply.

What to watch

Lower borrowing costs can speed up AI construction, but it also ties more banks, insurers, pensions, and other investors to the assumption that demand for AI computing will keep rising. Ratings firm Moody’s said it is watching the financial health of AI labs like Anthropic and OpenAI, since deals backed by weaker customers can carry more risk.

Source: Financial Times