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The amount of new debt raised by technology companies to help finance costly developments in artificial intelligence fell sharply last month, as investors reassessed the sector’s risks after months of frenzied borrowing.
AI-related debt issuance fell to $23 billion in September, less than half the amount raised the previous month, according to data compiled by Morgan Stanley, which covers both public bonds and private placement transactions. New funding has steadily declined since the market peaked in June, when companies raised a record $113 billion to help fund technology-critical infrastructure, including data centers and chips.
In the U.S. investment-grade market, where blue-chip tech groups borrowed about $306 billion between January and August, AI-related bond issuance stopped last month.
Morgan Stanley said the drop in new issuance was mainly due to the scale of debt already raised earlier this year. But investors also increasingly questioned whether such heavy investments would pay off in the long term, while data center construction faced growing political opposition.
The pullback comes at a delicate time for the sector, as investors assess their level of exposure to AI and scrutinize the growing debt of some companies and their uncertain capital spending needs.
“The actual day-to-day financing is getting a little trickier,” John Aylward, founder of London-based credit specialist Sona Asset Management, said at the FT and Latham & Watkins Private Capital Summit in London this week. “Everyone is involved and everyone tightens up a little bit.”
The pace of AI-based debt issuance has accelerated this year. According to Morgan Stanley, approximately $466 billion in AI-related debt was raised by companies in 2026, compared to $101 billion for the same period last year. The volume of new debt supply has allowed credit investors to demand higher yields to finance certain projects, driving up borrowing costs for hyperscalers.
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The change in investor sentiment is also expected to test upcoming blockbuster deals aimed at financing the purchase of advanced AI chips. Wall Street banks are putting together a $60 billion financing package for Broadcom and Anthropic, while SpaceX is in talks to raise $40 billion to buy Nvidia chips, the FT reported. Both transactions are expected to be syndicated to a broad range of investors in the coming months.
Even as the world’s largest technology companies clamor for additional funding, data centers in the United States are beginning to face local opposition. Residents are concerned about the impact these energy-intensive sites will have on local water supplies and air quality.
Oracle’s massive data center campus in New Mexico, called “Project Jupiter,” has become a hot spot. About $18 billion in loans tied to the project are still under pressure after Oracle issued a force majeure notice when the site struggled to access power. The loans were privately priced at about 85 cents on the dollar in recent days, people familiar with the matter said.
“Will we learn quickly enough from these mistakes? Jordan Rieger, managing director and head of European credit at Monarch Alternative Capital, said, referring to the broader risks of data center financing.
He added that the recent slowdown in new financing could provide a welcome opportunity for debt investors to reassess credit risk after being inundated with new issuance in recent months. “It’s a good opportunity to ask yourself: have we structured these facilities well?”
Rob Dafforn, investment director at distressed debt specialist Polus Capital, said widespread “speculation” and “very highly leveraged” deals in the sector mean some investors are already paying more than they should.
“The cost of financing some of these transactions is high, and I’m not sure that with this uncertainty around timing (and) payment profiles, the value is actually accumulating in the system,” Dafforn said.
Distressed debt funds like Polus have remained largely on the sidelines of the AI trade as company valuations have soared. Although Dafforn’s company has begun mapping out the range of AI-related financial deals already agreed upon, he has yet to make any investments.
The amount of debt raised for the AI industry has no precedent in modern history, as its volume has transformed the way other companies and governments issue debt. However, the speed with which the relatively nascent technology has taken hold in credit markets has also raised questions.
“Often we find ourselves in new sectors or new industries laying the railroad tracks while we drive the train,” Rieger said. “I hope this doesn’t get derailed before it’s too late.”
Additional reporting by Ramsay Hodgson
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