Would you bet your retirement on a data centre? It’s probably not a question many pension savers have asked, but it is now one that is very relevant. That’s because a large chunk of the $7tn investment pouring into data centres between now and 2030, as forecast by McKinsey, is being financed by debt of the kind that lines millions of nest eggs.
Dreams of artificial intelligence supremacy have spilled over from tech billionaires’ imaginations into the fixed-income markets, and investors are starting to get nervous. A basket of bonds from the biggest “hyperscalers” — the term used to describe companies such as Alphabet, Microsoft and Amazon — fell sharply this week as their perceived riskiness relative to Treasuries reached its highest level in months.
Oracle has been particularly hard hit. Compared with Microsoft, Alphabet or Facebook owner Meta Platforms, its balance sheet is already somewhat burdened: its credit rating of BBB, near the lowest within the investment-grade category, reflects a $110bn debt pile, triple its annual ebitda.