AI Hyperscalers’ Shadow Borrowing Bolsters Private Credit Risks

Global financial regulators warn that AI hyperscalers are increasingly relying on off-balance-sheet debt to fund infrastructure expansion, raising systemic risks in private credit markets. The Bank for International Settlements highlights insurers and private credit funds as the most exposed entities due to their heavy investments in these shadow borrowing arrangements. This trend accelerates as AI demand surges, with hyperscalers leveraging off-book financing to avoid balance sheet scrutiny while securing capital for data centers and quantum-AI hybrid systems. Regulators fear potential contagion if hyperscalers default, given the opaque nature of these debts and their concentration among a few non-bank lenders. The March 2026 report signals growing concern over financial stability as AI’s capital intensity clashes with traditional risk assessment frameworks.