Mark Zuckerberg’s Meta has tapped the “private credit” market for $29 billion in financing for a datacenter expansion. This move highlights the “shadow banking” sector that is playing an increasingly central—and risky—role in funding the $3 trillion AI infrastructure boom.
Private credit is a “growing part of the shadow banking sector” that is “raising the alarm at the Bank of England.” Analysts at Morgan Stanley believe this sector could plug more than half of the $1.5tn “funding gap” in the datacenter build-out.
This “funding gap” is the money required beyond what “hyperscalers” like Meta, Google, and Microsoft can cover with their own cash. While Meta’s own deal is likely secure, it signals the market’s “eagerness” to lend to AI, which is where the risk lies.
Analysts like Gil Luria warn that lenders, desperate to “deploy capital into AI,” are “improperly assessing the risks” of funding “unproven” and “speculative assets.” These “speculative” projects, unlike Meta’s, are being built “without their own customers.”
If this $1.5tn in private debt sours, the consequences could be severe. Luria warns that if the debt load reaches hundreds of billions, it “could end up representing structural risk to the overall global economy.” Meta’s $29bn deal is just the tip of a very large, and potentially very risky, financial iceberg.