Wall Street Is Funding The AI Build-Out With Bonds The SEC Never Sees

Billions of dollars are being poured into a niche corner of the private credit world to build data centers despite jitters on Wall Street about the lenders' concentration in artificial intelligence. 

Data center development is increasingly being financed with 144A bonds, debt securities that don’t need to be registered with the Securities and Exchange Commission and are sold only to qualifying institutional buyers in private markets. For data centers, the burgeoning market was practically barren a year ago, but today it is rapidly expanding and propelling construction.

“What 144A offers is speed, scale and a broad institutional investor base that can move relatively quickly,” said Chris Lozinak, managing director of Newmark's global debt and structured finance group. “The 144A can be tapped by the crème de la crème of institutions on the sponsor and development side, but it can also be used to tap more downstream credits or deals that do have some risk.”

The private placement debt structure has been tapped by other real estate sectors since it was introduced as part of regulatory reforms in 1990, but data center developers didn’t start leaning on the framework until Meta tapped it for a massive deal in 2025.

Blue Owl Capital, one of the most active and highly scrutinized publicly traded originators of debt for data centers, and Pimco partnered with Meta on a $27.3B bond offering that is being used to build a 2-gigawatt data center campus in Louisiana. 

The bonds aren’t registered directly with the SEC and can only be purchased by well-funded investors holding at least $100M in unaffiliated securities, limiting the buyer pool to players like institutional capital, pension funds, insurance companies, hedge funds and other well-capitalized sources. 

The structure is being leveraged for data center development for its flexibility, frequently using longer loan terms to allow a project to get stabilized before a looming maturity date on construction debt.

“It's a very, very nimble tool, and so you can kind of craft these 144A financings accordingly for any specific transaction,” Lozinak said. 

In the Meta deal, funds associated with Blue Owl took an 80% stake in the project, while a Meta-controlled holding company owned the remaining 20%. The debt is set to mature in 2049 and received an investment-grade rating from S&P Global, in part because the contract structure transfers construction risks to Meta and was structured to give the tech giant’s holding company nearly the same credit quality as its parent firm. 

The $27B Blue Owl and Meta joint venture was a particularly large deal, but developers and operators, including Applied Digital, CoreWeave, Hut 8 and Related Cos.’ data center business, have together added more than $40B in 144A placements since November, a Bisnow analysis found.

Some investors are worried about the concentration of AI-related risk that the private credit sector has amassed. Those fears led to a stock sell-off in March, and that has left Blue Owl's shares down more than 30% this year. 

But the 144A private placement debt is going toward the construction of preleased data centers that are real assets with a bankable cash flow, which looks like a conservative bet compared to the private credit extended to an AI firm to develop the next market-making software.

“While some people may take the euphoria as a little concerning, I think everybody there is certainly still anchored to the extremely strong and robust fundamentals that are supporting the sector,” Lozinak said. 

The transformative power of AI is only beginning to be realized as a sector that barely existed five years ago bursts onto the scene. The United Nations projects the global AI market will be worth $4.8T by 2033, and the expectation of the tech's near ubiquity is leading capital markets to approach data centers more as infrastructure than as an industrial asset. 

Hyperscaler clients like Meta, Google, Microsoft, Oracle and others are signing long-term leases at properties often before any financing is unlocked, and the shift to an infrastructure framing treats full occupancy as a given and transforms the property on a balance sheet into a predictable source of cash flow.

Long-dated bonds like the Blue Owl and Meta deal are targeting insurers and pension funds that are looking to lock in returns and neatly align terms on their assets and liabilities. 

Investors that are typically more conservative are being lured by data center projects preleased by a highly credit-rated tenant for a long term, said John Medina, an infrastructure finance analyst at Moody's Ratings. Against that framing, the property looks more like a triple-net investment than a speculative asset. 

“These funding sources to me are normal funding sources, because I see them in infrastructure all the time. It's just that this sector is now being seen as infrastructure,” Medina said. 

Deals span the gamut from construction financing like the Blue Owl transaction to long-term debt on stabilized assets with longer-dated timelines that align with institutional investors’ return profiles. Most offerings get at least one rating from Moody’s, S&P Global or Fitch. 

Moody’s assigned ratings on Feb. 10 from high to lower-medium investment grade for a debt securitization from DataBank Holdings that covered 36 data centers and their related leases, more than half the data center operator’s portfolio. 

The positive rating for the combined $665M in notes was supported by DataBank’s strong market positioning, customer diversity and sector fundamentals, Moody’s said. At the time of issuance, the portfolio’s 258 megawatts of capacity was 84% leased by square feet to 1,750 customers. 

A 144A offering from Compass Datacenters that same month also received investment-grade ratings from Moody’s, the inaugural hyperscale securitization to get a AAA rating from a major ratings agency. It was backed by six recently developed or new properties in primary markets in the U.S. and Toronto that were 100% leased primarily to hyperscaler tenants. 

The bonds are being offered because there is strong demand from qualified investors. Concerns about an AI bubble may be warranted, but the 144A syndication space would be one of the last places that distress would manifest, Medina said. 

“These are all, at the end of the day, backed by very high-rated, well-structured leases. There is a difference between the risk of the debt and the risk of the market,” he said.