Economically Akin to Debt: A BIS Note on Financing AI Infrastructure

The Bank for International Settlements, BIS, dated its Quarterly Review for March 2026 on March 16. One note in it is titled "Financing the AI infrastructure boom: on- and off-balance sheet borrowing." Its subject is how big US tech firms, which it calls hyperscalers, pay for AI infrastructure, and where the debt sits. A line at its foot says the views "are those of the authors and not necessarily those of the BIS or its member central banks."

Bonds

The note opens on spending. Investment in AI infrastructure, "particularly data centres," has risen rapidly, it says, and as the hyperscalers' capital spending has grown "significantly beyond their usual investments, a rising share of spending is funded through borrowing."

Bonds have been the main route. "Corporate bond markets have been hyperscalers' primary source of financing," the note says, and their gross issuance topped $100 billion in 2025. Most of it was long-term, "with maturities over five years, locking in funding for multi-year build-outs."

The note adds a however. Credit default swap spreads rose, "especially for hyperscalers with lower credit ratings, reflecting both the volume of supply and uncertainties around the projects' payoffs."

Off the balance sheet

Alongside traditional bonds, hyperscalers "have turned to off-balance sheet arrangements to finance infrastructure expansions, often in partnership with private credit firms." In what the note calls a common structure, a dedicated vehicle, "often a joint venture or special purpose entity," acquires or develops data center assets. Sponsors put in equity, and the vehicle "raises debt through private placements."

The hyperscaler "typically holds a minority stake," commits to long-term operating leases or capacity offtake agreements, and "may provide various guarantees." The note explains capacity offtake agreements itself, as "longterm commitments to purchase or reserve power and compute capacity." Economically, it says, this "substitutes upfront capex with multi-year operating expenses while keeping most of the associated debt off the hyperscaler's balance sheet." Lease cash flows service the debt, which "is held by private credit funds and other institutional investors, sometimes with investment grade features supported by asset backing and contractual guarantees from hyperscalers with investment grade credit ratings."

The note counts a commitment to reserve power among the hyperscaler's undertakings. For the developer of a plant that would supply such a vehicle, the paper worth reading is that commitment, and whose credit stands behind it.

What the authors call shadow borrowing

The authors call these arrangements shadow borrowing, which they define as "obligations that are economically akin to debt but largely reside outside corporate balance sheets." By channelling "sizeable private credit into AI infrastructure," it says, these structures "strengthen links between hyperscalers and non-bank investors such as private credit vehicles and insurers." Its last sentence turns to banks. "Banks support the vehicles with funding lines, potentially creating new shock transmission channels," the note says, and it gives as examples "refinancing pressures at the vehicle level, procyclical shifts in private credit appetite or the activation of guarantees."

The note ends on guarantees that may be called. For a project whose power buyer is such a vehicle, the question is what stands behind the lease if the vehicle comes under refinancing pressure.