The AI revolution may change the world, but it comes with a 13-figure price tag. By 2030, tech companies are expected to pour $7tn into data centres — enough money to feed every person in China for three years. So great are the sums involved that even Big Tech groups with tens of billions of dollars in cash need to fund the infrastructure with debt. This is presenting major lenders with a complex set of calculations as they stretch themselves to finance, insure and underwrite an entirely novel asset class. The possible returns are enormous, convincing some of the world’s biggest and most sophisticated private investors to provide Nvidia with $500bn in financing just this month, and offering what some in the insurance industry regard as a potential bonanza. But the risks are also great, and growing. Firstly, the question of longevity: the possibility that the data centres and the chips that equip them will not retain their value for the lifetime of the financing that funds them.

“It’s like you’re financing a fax machine and then someone invented email,” says Carlos Mendez, co-founder at Crayhill Capital, which has repeatedly turned down debt deals secured by the value of chips that lacked structural protections. There is also the risk of a growing popular backlash against the centres, with their mammoth appetites for water and electricity at a time when AI is increasingly controversial.

“As long as developers have the permits they need, they can continue borrowing. But local opposition or the loss of a permit could stop that midway through construction,” says Eric Klar, a debt finance partner at White & Case. “For lenders who have already put money into the project, the question is: what happens then?”Then there is the additional difficulty of laying off risks to other parts of the financial system. Lenders and project developers are eager to insure against everything from natural disasters and power outages to a slump in demand for computing power. But insurance companies have been reluctant to provide billions of dollars’ worth of coverage for the biggest projects, concerned about catastrophic risk as well as concentrated exposure to these giant sites. And that is without taking into account the most fundamental gamble of all — that the AI revolution will produce unprecedented productivity and profit gains, that the frontier models that require the most extensive data centre infrastructure will emerge the winners, and that the individual companies investors are backing will prevail.

“Everyone has decided they want to be in the railroad business,” says Pulitzer Prize-winning author Liaquat Ahamed, whose history of the 1873 railroad bubble has been cited as an essential text for navigating the current moment by Microsoft chief Satya Nadella. That company alone has announced some $175bn in data centre investment this year. The problem with such expenditures, Ahamed adds, is that “they’re not taking into account that all the other tech companies are doing the exact same thing”.Given all that, major lenders are looking to shift their riskiest exposures elsewhere, including to corners of the financial system that could be more vulnerable to stress — and in the process enveloping yet more of the wider economy in the AI bubble. The data centre build-out has become an all-consuming feature of the American economy. Stijn Van Nieuwerburgh, an economist at Columbia Business School, estimates that the AI build-out will account for some 2.8 per cent of economic output in the coming years, an even greater share of US GDP than railways represented at their 19th-century height. The four so-called hyperscalers alone — Amazon, Microsoft, Alphabet and Meta — have signed leases in excess of $1.5tn since the AI boom began, including commitments that have yet to take effect.