About 20 banks are backing an $18 billion loan to fund a massive AI-focused data center in Doña Ana County, New Mexico, Bloomberg reported. The facility forms part of the Stargate project, a $500 billion initiative led by OpenAI (PC:OPAIQ), SoftBank (SFTBY), and Oracle (ORCL) to build out AI infrastructure across the country. Oracle is expected to be the tenant of the new campus.
Claim 50% Off TipRanks Premium and Invest with Confidence
- Unlock hedge-fund level data and powerful investing tools designed to help you make smarter, sharper decisions
- Stay ahead of the market with the latest news and analysis so your portfolio is always positioned for maximum potential
Major banks, including Sumitomo Mitsui (SMFG), BNP Paribas (BNPQY), Goldman Sachs (GS), and Mitsubishi UFJ Financial (MUFG), are administrative agents on the loan. These banks will sell the debt to other banks and institutional investors in a process called syndication, with commitments due later this month.
The loan is expected to carry an interest rate of 2.5% above the Secured Overnight Financing Rate (SOFR), reflecting the scale and complexity of the project. Also, it will mature in four years, with options to extend twice by one year each.
This deal mirrors a separate $38 billion financing package for data centers in Texas and Wisconsin, also linked to Oracle and OpenAI. The surge in debt issuance reflects the race to build the physical backbone for generative AI tools like ChatGPT, which require immense computing power and storage.
Funding the AI Infrastructure Boom
AI companies are racing to build the massive infrastructure needed to support next-gen models. Morgan Stanley (MS) estimates that AI-related capital expenditures could top $3 trillion over the next three years, with data centers driving most of that investment. To fund these large investments, companies are tapping into a mix of financial strategies.
Many AI leaders are raising capital through stock offerings and convertible debt. OpenAI, for example, is considering equity and debt raises to support its $1.4 trillion infrastructure roadmap through 2033.
Further, Meta (META) recently issued $30 billion in investment-grade bonds and secured another $30 billion in private capital for its Hyperion site in Louisiana. Oracle itself raised $18 billion in high-grade bonds in September to support its infrastructure push.
What Is the Best AI Stock to Buy?
Here’s a list of top-rated AI stocks. Let’s compare them using the TipRanks Stock Comparison Tool to see which looks most attractive.
