Only $5 billion in October! AI leveraged financing suddenly cooled down. Damo warned that the threshold for new transactions would rise, and “Xinyun” bonds would fluctuate or intensify

The Zhitong Finance App learned that Morgan Stanley said in a report that higher financing costs, or delays in project construction will suppress market activity, and that the issuance of leveraged bonds linked to artificial intelligence (AI) will continue to be “sluggish, and the threshold for new transactions will rise significantly.”

According to the bank's latest report, the amount of AI-related leveraged financing issued in October was only $5 billion. The $5 billion came entirely from a single borrower, Volta Infrastructure Holdings Ltd. According to previous reports, the company raised capital through term loans, and the issuance yield was over 11%.

According to Morgan Stanley strategists, it is expected that the market's distribution scale will remain limited until the end of the year. After the US midterm elections, companies that rely on high-yield bonds and leveraged loans may face more obstacles in obtaining electricity packages and approving new project construction, thereby changing the pace and scale of corporate investment.

Morgan Stanley said that in order to successfully complete financing, project developers may need to pay higher premiums to lenders to cover construction risks; either repay more principal before refinancing, or introduce tenants with better credit qualifications. As investors scrutinize new construction projects more strictly, it will be particularly difficult to finance projects that rely on low-rated tenants.

The bank also predicted that fluctuations in data center construction bonds and debts issued by so-called “new cloud vendors” (neocloud) will increase. These new cloud vendors (such as CoreWeave (CRWV.US) and Nebius (NBIS.US)) rent out the right to use AI chips, are highly dependent on external capital, and have a limited operating history. When investors have more opportunities to participate in chip financing projects endorsed by more qualified entities, lenders will be more cautious about transactions with weak guarantees.

According to Morgan Stanley data, the amount of AI and data center debt issuance since 2026 has reached US$646 billion, which is about three times that of US$216 billion in 2025. The bank's forecast for the total capital expenditure of leading cloud vendors in 2027 remains unchanged after the midterm elections, and it is expected that such companies will drive the upward demand for AI-related financing next year.