2d • News
🚨 THE A.I. BOOM IS BEING FINANCED BY A $2 TRILLION INDUSTRY THAT HAS NEVER SURVIVED A RECESSION.
And the world's top financial regulator just admitted it cannot properly monitor it.
The Financial Stability Board published its verdict on May 6. Private credit has grown to $2 trillion in assets. It has never been tested in a prolonged economic downturn:
• High leverage
• Sector concentration
• Valuation opacity
Their words, not a critic's.
Now connect it to what is actually happening.
Morgan Stanley estimates $2.9 trillion in global data center construction through 2028. Roughly half of that, $1.5 trillion, is coming from private credit:
• Blackstone
• Apollo
• Blue Owl
• BlackRock
They are the primary lenders financing the A.I. infrastructure buildout driving every S&P 500 record you are watching.
Outstanding private credit loans to A.I. companies surged from near zero to over $200 billion in just a few years.
Here is what sits underneath that number.
Borrowers carrying 5 to 7 times earnings in debt. 10% of them cannot generate enough cash flow to cover their interest payments. Default rates rising. None of it visible in public market data because the entire industry operates privately with no standardised reporting, no public ratings, and valuations updated once a quarter using management discretion.
Banks are more exposed than anyone realises. The FSB found between $270 and $500 billion in direct bank exposure to private credit. Half of all private credit borrowers also carry revolving credit lines at banks simultaneously. When private credit borrowers default, losses hit funds and banks at the same time.
Retail investors are now being let in. Participation went from virtually zero to 13% in a decade. Most have no idea their money sits in illiquid loans to leveraged companies that cannot be valued or sold in a crisis.
One analyst described the financing structures as almost going back to the same cycle with no transparency and astronomical scale.
Five companies make up 30% of the S&P 500. A.I. investment accounts for half of U.S. GDP growth. The entire market is being held up by the A.I. boom. The A.I. boom is being financed by private credit. Private credit operates in the dark.
If A.I. delivers, nobody talks about this. If it does not, the losses do not appear in public markets until it is already too late.
That is the nature of a crisis that builds in the dark.
1
0 comments
🚨 THE A.I. BOOM IS BEING FINANCED BY A $2 TRILLION INDUSTRY THAT HAS NEVER SURVIVED A RECESSION.
