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Banks, investors grow wary of AI debt, spooked by market selloff

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Banks, investors grow wary of AI debt, spooked by market selloff

Business News Tech AI Banks, investors grow wary of AI debt, spooked by market selloff

Some banks, which just a few weeks ago were lining up to fund AI deals, are now telling market participants they would be reluctant to finance additional deals even when they involve guarantees from the sector's marquee technology companies, according to several banking and credit sources.

Banks and credit investors are upping their scrutiny of AI-related debt deals while showing reluctance to increase exposure to borrowers, jolted by the recent market selloff and changing sentiment toward the technology's growth trajectory. Some banks, which just a few weeks ago were lining up to fund AI deals, are now telling market participants they would be reluctant to finance additional deals even when they involve guarantees from the sector's marquee technology companies, according to several banking and credit sources. The lending pullback has been exacerbated by a recent drop in the stock market, which erased $2.5 trillion in market value on Thursday from the Nasdaq 100, and sent the index into a correction. The US midterm election results are also adding anxiety about more oversight of data centers.

A potential slowdown in AI data center construction could curb loan growth and dent investment banking fees from the loans, bond sales and stock offerings that have helped finance the sector's rapid expansion. The change, according to two sources, has come in just the past few days. Some lenders have shown reluctance to finance deals even if they are backstopped by names such as Anthropic and Google , the sources said, without specifying names of the lenders.


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