A $1.5 Trillion “Shadow” Boom: How Risky Debt is Funding the AI Revolution

Beneath the $3 trillion headline figure for the AI datacenter boom lies a $1.5 trillion “shadow” boom, and it’s built on a foundation of risky debt. This is the “funding gap” that cash-rich “hyperscalers” like Google and Microsoft won’t be covering, and its financing “is raising the alarm at the Bank of England.”
This $1.5tn is expected to be plugged by “private credit,” a “growing part of the shadow banking sector” that is less regulated. Mark Zuckerberg’s Meta has already tapped this market for $29bn for a datacenter expansion, signaling a trend that analysts find worrying.
Gil Luria of DA Davidson warns that this “influx of debt capital” is “speculative.” He states that lenders, “eager to deploy capital into AI,” are “improperly assessing the risks.” They are funding “a new unproven category” of “speculative assets” that depreciate rapidly.
These “speculative” projects are often being built “without their own customers,” according to Alibaba’s chair. This is a classic sign of a bubble, where financing is divorced from real-world demand.
If these “unproven” projects fail—a real risk given an MIT study showing 95% of AI pilots have “zero return”—the “hundreds of billions of dollars” in private debt could go sour. This, Luria warns, “could end up representing structural risk to the overall global economy,” turning the AI boom into a financial contagion.