Usman Salis
● A tweet from junkbondinvestor spotlighted fresh Morgan Stanley research showing private lenders are about to become the dominant force in data center financing. According to the report, private credit could cover more than half the $1.5 trillion funding gap—marking a massive shift in how digital infrastructure gets built.
● Morgan Stanley puts the total price tag for the global data center buildout at $2.9 trillion, fueled by exploding AI demand. Hyperscalers will chip in $1.4 trillion from their own cash flows. The rest comes from a mix of sources: $800 billion in private credit, $350 billion from private equity and sovereign funds, $200 billion in corporate debt, and $150 billion through asset-backed securities. That $800 billion private credit piece? Morgan Stanley calls it a once-in-a-generation opportunity.
● But there's a catch. Leaning this hard on private lenders creates risks. If borrowing costs spike or liquidity dries up, some operators could hit trouble—leading to delays, consolidation, or even bankruptcies. Morgan Stanley warns this concentration of non-bank funding could make the sector more fragile, similar to what happens when sudden policy shifts shake up an industry.
● The bank also flags how too much private debt could squeeze long-term profits and limit reinvestment. A more balanced approach—spreading funding across different sources—would create more stability and reduce leverage risks.
● Beyond financing, Morgan Stanley notes the buildout will reshape entire economies. Thousands of high-skilled construction and tech jobs will boost income tax revenues, while growing data center profits lift corporate tax contributions.
Usman Salis
