Goldman Sachs and JPMorgan suddenly brake on AI infrastructure financing: Out of $5 billion AI loans, only $1.3 billion are accepted, and even with an 11% high interest rate, they dare not take it all.

JPMorgan (JPM.US) and Goldman Sachs (GS.US) have taken a rare step to limit their risk exposure on the sale of a $5 billion loan to AI startup Volta Infrastructure Holdings Ltd. The move comes as investors demand higher yields for riskier debt tied to the artificial intelligence boom.

The two banks are leading the syndication of Volta's loan. Volta is a newly established artificial intelligence cloud company. According to sources familiar with the matter, the two banks have underwritten a $1.3 billion term loan for Volta, while a $3.7 billion chip loan is not being underwritten by them—an effort to shield themselves from potential risks.

Volta's debt is being marketed to investors at a yield of about 11%, one of the highest borrowing costs in the leveraged loan market, which has become a popular financing channel for AI. Notably, the transaction is unrated, a factor that typically prevents collateralized loan obligations (CLOs)—the largest buyers of such debt—from purchasing these loans.

Lenders typically fully underwrite the entire debt package to assure borrowers that, regardless of whether investors subscribe, the deal will be funded. Underwriting is a lucrative business for lenders, often linked to acquisition deals, but if the debt is sold at a price below the agreed level with the borrower, or fails to sell at all, lenders risk being stuck with the debt. Debt commitments for AI transactions are even less common.

Banks are wary of being caught off guard again as they were in 2022, when rapidly rising interest rates froze the market, leaving a large volume of unsold debt stuck on lenders' balance sheets and resulting in heavy losses.

Addressing Risk

According to people familiar with the matter, funding the AI boom—especially arranging deals for newly established or untested companies—has required lenders to use less conventional underwriting structures in the leveraged finance market. They added that banks are trying to navigate potential risks and ensure they are not blindsided.

Volta falls into a group of AI companies known as “neocloud,” which lease chips and other AI infrastructure. The deal will finance a data center complex in Norway, which will be managed jointly by Volta Infrastructure and Bitdeer (BTDR.US), a Bitcoin mining company operating data centers. Sources said that Anthropic PBC has signed a six-year agreement for computing power capacity at the site.

The $1.3 billion term loan will be used to pay Bitdeer for leasing the data center. The $3.7 billion chip loan will be used to purchase about 36,000 graphics processing units (GPUs) manufactured by NVIDIA (NVDA.US).

Wall Street has thrown its full support behind AI infrastructure, as shown by deals with neocloud companies such as CoreWeave Inc. (CRWV.US), Lambda Inc., and Crusoe Inc., illustrating lenders’ willingness to finance chip purchases. However, the borrowing costs of these earlier deals were all lower than Volta’s transaction.

Volta was founded earlier this year by Ricard Boada and Sofia Gumucio, both formerly with the infrastructure division of Brookfield Asset Management (BAM.US). The company aims to make NVIDIA’s advanced chips more affordable for leading AI labs and smaller startups.

The subscription commitment deadline for this deal is October 14. JPMorgan began sounding out investor interest in the loan as early as August.