Why Credit Is Core to AI Expansion

Morgan Stanley strategists Vishy Tirupattur, Vishwas Patkar, and Carolyn Campbell discuss investor feedback on their report concerning data center financing. They address skepticism comparing the current situation to the late 1990s telecom boom, highlighting key differences such as hyperscalers' cash reserves and the involvement of various financing channels beyond corporate debt. Concerns about overbuilding, refinancing challenges, and investor demand are also addressed, with the strategists emphasizing the power bottleneck limiting construction and the potential for increased investor participation as the market grows. Finally, they discuss the potential for data center financing to divert capital from public credit, acknowledging it as a possible long-term risk but not an immediate concern. The overall message is that while risks exist, data center financing will remain a significant theme for credit investors due to AI's transformative potential.