Morgan Stanley is reportedly leading a syndicate aiming to divest $15 billion in AI data center debt: Although backed by Alphabet Inc. Class C (GOOG.US), the bonds are expected to remain speculative grade.

According to reports, a banking consortium led by Morgan Stanley (MS.US) is preparing to sell approximately $15 billion in debt related to a data center project supported by Alphabet Inc. Class C (GOOG.US) that is leased to the AI startup Anthropic. Even with the backing of Alphabet Inc. Class C, these bonds are still expected to be rated as speculative grade. This financing is related to a 2,000-acre data center campus being developed by Nexus Data Centers in Hubbard, Texas. The campus will deploy Alphabet Inc. Class C TPU chips, and Anthropic will sign a long-term agreement to lease the facility, with support backing provided by Alphabet Inc. Class C. The report states that this refinancing could help the banks remove this debt from their balance sheets, reducing their risk exposure in the AI infrastructure financing business and freeing up space for more credit deployment. The $15 billion in financing is expected to be refinanced through multiple bond issuances, with Nexus Data Centers phasing out loans after achieving construction milestones. Some of the debt may also be refinanced in the leveraged loan market. Insiders revealed that despite the support from Alphabet Inc. Class C, this batch of bonds is still expected to be rated as speculative grade. The reason is that Alphabet Inc. Class C's guarantee only becomes effective after the data center is completed, meaning investors still need to bear risks related to project construction and cost overruns. Currently, the demand for financing data center projects continues to squeeze the traditional infrastructure credit market, leading more banks to turn to the bond market for refinancing large AI infrastructure loans. Since 2026, the debt issuance for AI infrastructure financing by tech giants has surged, resulting in noticeable signs of "indigestion" and investor fatigue in the global bond market. Media reports from July indicated that six "AI hyperscale computing companies"Alphabet, Amazon.com, Inc., Meta, Oracle Corporation, NVIDIA Corporation, and SpaceXhave collectively issued approximately $244 billion in bonds in the global bond market this year, more than double the $108 billion issued last year and over 14 times the expected $17 billion for 2024. Due to an oversupply, newly issued bonds have quickly softened in the secondary market. The spread on 10-year bonds for Alphabet and Meta has widened significantly, surpassing the increase in the average spread for overall investment-grade bonds, reflecting investors' demands for higher risk compensation. Jeffrey Papai, an investment-grade bond trader at Goldman Sachs Group, Inc., stated that the issuance of AI-related bonds has left the market "fatigued in digestion."