Morgan Stanley, a major contributor to funding the artificial-intelligence competition, is contemplating divesting a portion of its data-center holdings through a method known as a significant risk transfer.
TL;DR
- Morgan Stanley is exploring a significant risk transfer for data-center holdings.
- Discussions involve securitized risk transfer (SRT) linked to AI infrastructure credit facilities.
- This method helps financial institutions mitigate credit exposure and enhance lending capacity.
- Morgan Stanley previously arranged significant financing for Meta Platforms Inc.'s data-center.
Sources familiar with the situation, who requested anonymity due to the sensitive nature of the information, have indicated that the financial institution has engaged in initial discussions with prospective financiers concerning a securitized risk transfer (SRT) linked to a collection of credit facilities extended to companies operating within the AI infrastructure sector.
Securitized Risk Transfer (SRT) instruments supported by data-center investments represent a developing segment within the credit-risk transfer arena. In this market, financial institutions mitigate their credit exposures, control capital adequacy, and enhance their capacity for additional lending by offloading credit-linked notes to institutional financiers. According to sources, Morgan Stanley is investigating alternative methods to hedge or syndicate portions of its data-center exposure, and there's no certainty that the preliminary discussions regarding SRTs will culminate in an agreement.
A representative for the New York-based bank declined to comment.
Morgan Stanley in October arranged over $27 billion of debt and about $2.5 billion of equity financing for a special-purpose vehicle tied to the development of Meta Platforms Inc.’s Hyperion data-center site in Richland Parish, Louisiana.
The financial institution also spearheaded three recent high-yield debt issuances from TeraWulf Inc., Cipher Mining Inc., and Applied Digital Corp., with a portion of the funds raised designated to support the development of new data-center infrastructure.
Strategists at Morgan Stanley predict that major cloud computing firms will allocate approximately $3 trillion toward data-center infrastructure development by 2028. The bank's assessment suggests that available cash flow will cover only around half of this expenditure, with the majority of the remaining funds being sourced from debt markets.
The lending surge may leave banks overexposed to a small group of companies.
Oracle Corp., the formerly conservative database titan that has taken on substantial debt and linked its success to the artificial intelligence surge, has experienced a significant increase in the expense of insuring its debt against failure over the past few months. A research paper from Morgan Stanley suggests that financial institutions and other creditors participating in the funding of its building projects are probably a primary factor behind this escalation.
Earlier this year, Morgan Stanley pitched a securitization of risk transfer tied to a pool of credit extended to private market funds. Citigroup Inc., JPMorgan Chase & Co. And Goldman Sachs Group Inc, are also counted among US financial institutions that offered SRT transactions in 2025.
A Bloomberg Intelligence survey released in June projects that worldwide sales of SRTs will grow by approximately 11% each year for the upcoming two-year period.
