Driven by artificial intelligence, the wave of investment in data centers dangerously echoes the telecom bubbles of the 1990s or the railroad bubble of the 19th century. The rise of private credit and bank exposure fuel these fears.
Amid global enthusiasm for AI, a new bubble might be quietly forming. In the United States, the massive construction of data centers is raising increasing concern among economists: the fear that this expansion, increasingly financed by debt and private credit, could ultimately trigger a financial crisis comparable to 2008.
According to figures published by The Wall Street Journal, the seven tech giants listed on the US stock market—led by Meta, Google, Microsoft, and Amazon—spent $1.025 billion in capital during the last quarter, mostly on AI-related infrastructure. For Microsoft and Meta, these investments now account for more than a third of their total revenues.
Neil Dutta, chief macroeconomic researcher at Renaissance Macro Research, states that in the past two quarters, capital spending related to AI has contributed more to US GDP growth than private consumption itself.
Is this a new infrastructure bubble?
Historically, large investments in tech infrastructure have had mixed outcomes. In 1873, it was the railroad; in the 1990s, fiber optics. Both cycles ended in financial collapses, after years of overcapacity and demand falling short of projections. While these infrastructures proved useful to society in the long run, investors caught in the peaks of overinvestment never recovered their losses.
The difference this time is the mode of financing. While the 2000 dot-com bubble was largely supported by equity capital, the current data center boom is increasingly leveraged through debt, especially via the private credit market, also known as “shadow banking.”
The rise of private credit: an opaque time bomb
As capital spending outpaces cash flow, major tech firms are turning to new sources of funding. According to The Economist, companies like Meta are negotiating loans of up to $30 billion with private credit giants such as Apollo or Carlyle.
This unregulated financing, although profitable during growth periods, could become a source of systemic risks if assets underperform. The problem worsens because these credit funds are also financed with bank loans, establishing an indirect link between the traditional banking sector and the new tech boom.
A recent Federal Reserve report shows that the percentage of loans from US banks to private credit firms has risen from 1% in 2013 to 14% in 2023. If the data center sector takes a sharp downturn, bank exposure could become a “tail risk”.
The role of insurers: the new AIG
Banks aren’t the only players involved. Insurance companies, especially life insurers, have significantly increased their exposure to junk bonds of non-investment-grade companies. According to a study by the Federal Reserve Bank of Philadelphia, these holdings now surpass the total of subprime mortgages insurers held in 2007, right before the crisis erupted.
The parallel with AIG—the insurance giant bailed out during the 2008 financial crisis—is unavoidable. Monetary authorities are increasingly concerned that private credit is transferring risks in a murky way across the entire financial system.
The shadow bank behind AI
Paul Kedrosky, an investor and tech analyst, describes the private credit market as the “dangerous bridge” between the data center craze and the conventional financial system. Kedrosky notes that AI investment has already surpassed—relative to GDP—the peaks of telecom spending of the late 1990s. More troubling still: it shows no signs of slowing down.
Comparisons to previous bubbles are becoming more common. But as academics Jorda, Schularick, and Taylor warned in a 2015 influential study, a bubble only turns into a crisis when it’s combined with rapid growth in bank credit. This explosive combination is once again taking shape.
What could trigger a collapse?
It all comes down to a critical question: where is the real money behind this expansion coming from? And if that flow stops, who’s left holding the assets? The current financial logic—“as long as the music plays, we keep dancing”—closely resembles the pre-2008 climate.
JPMorgan Chase CEO Jamie Dimon has publicly warned that private credit could be the epicenter of the next major financial crisis, even as his own institution expands its activities in that sector.
Ultimately, while tech giants are building data centers at unprecedented rates and AI promises to change everything, a part of the financial system is dangerously leveraging this future promise. If the market overheats and bursts, the costs won’t just be borne by Silicon Valley investors but by the entire global financial system.
As always, the problem isn’t building too much but how that excess is financed. And in 2025, the answer is increasingly out of the public eye.