JPM Daily Credit Strategy Update: AI Capex 2.0 - If You Build it, They Will Finance it; Foreign Demand Monitor published

Research evidence excerpt

JPM Daily Credit Strategy Update: AI Capex 2.0 - If You Build it, They Will Finance it; Foreign Demand Monitor published

ent LTC ratios across the sector also represent some husbanding of capital. Put another way,

by leveraging projects now, companies reserve the right to use operating cash flow or primary equity market proceeds to reduce

their debt funding needs in the future in a less attractive/higher rate market. These management teams are smart and look to be

preserving optionality for rainy days.

The rise of the GPU financing. Over the last six months, spending on data center infrastructure has been the dominant theme in

markets. However, we expect capital spending on GPU and custom ASICs to start taking a disproportionate level of mind and

wallet share. Over the next five years, we expect over $3 trillion of financings for AI accelerators. Interestingly, while the curve

for data center financing will likely stabilize ~2028, chip financings will likely continue to grow into 2030, particularly as

replacement demand becomes a theme. Finding the right silicon financing paradigm is the billion dollar question, in our view.

Private credit has done a lot of work financing silicon so far, with the recent AI XPV JV between Broadcom/Apollo/Blackstone as

a potential landmark deal (discussed below). However, we think public markets will eventually need to do the heavy lifting.

Additionally, at some point, creativity will be needed to match the large funding needs of the AI silicon space with relatively

limited capital available at the five-year duration point. Finding a way to access giant pools of capital in the Investment Grade

market with duration of longer than ten years would solve a lot of funding challenges, in our view. But doing that given the