AI Hyperscalers’ Shadow Borrowing Bolsters Private Credit Risks

BIS officials warned that growing off-balance-sheet debt used to finance AI infrastructure is increasing insurers' and private credit funds' exposures to cloud hyperscalers. The development raises concentration and counterparty-credit risks for nonbank creditors and could prompt tighter oversight or stress-testing by regulators. Portfolio managers should review off-balance-sheet links to hyperscalers, assess counterparty limits and model tail scenarios for correlated losses.

Analysis

BIS officials warned that growing off-balance-sheet debt used to finance AI infrastructure is increasing insurers' and private credit funds' exposures to cloud hyperscalers. The development raises concentration and counterparty-credit risks for nonbank creditors and could prompt tighter oversight or stress-testing by regulators. Portfolio managers should review off-balance-sheet links to hyperscalers, assess counterparty limits and model tail scenarios for correlated losses.