The Securities and Exchange Commission has removed a regulatory obstacle that had limited how data-center operators raise debt, a shift that could accelerate the securitization of artificial-intelligence infrastructure. In a staff letter issued last month, the agency said a significant portion of data-center securitizations do not need to comply with the disclosure and risk-retention requirements that apply to conventional asset classes.
The clarification, first reported by Bloomberg and Reuters, came in response to a request from law firm Latham & Watkins, which had sought guidance on how data-center-backed bonds should be treated. The SEC determined that these securities are not asset-backed securities in the traditional sense, because data centers are physical assets rather than amortizing instruments like auto loans or leases. The distinction matters for advisors and investors in alternative credit and infrastructure funds, as risk-retention rules—implemented after the 2008 financial crisis—require sponsors of many asset-backed deals to keep a portion of the debt on their own books to align interests with investors.
Kevin Fingeret, a partner at Latham & Watkins, told Bloomberg that complying with those rules forced sponsors to adopt ownership structures that were not aligned with their ultimate objectives. The exemption removes that burden for data-center deals, potentially making them more attractive to issuers and investors.
Data-center ABS issuance has grown rapidly, climbing to $15.5 billion in new issuance last year from $2.4 billion in 2020, according to Bloomberg data, and is on pace to set a new record in 2026. Despite the multitrillion-dollar data-center boom, the asset class remains smaller than commercial mortgage-backed securities tied to data centers, which are unaffected by the exemption since their underlying collateral is a mortgage rather than the physical facility.
Morgan Stanley analysts, led by Katy Huberty, noted that the surge in AI-related debt has driven a meaningful widening in spreads across hyperscaler and data-center corporate credit. However, data-center ABS has been notably more resilient, with spreads still near year-to-date tights despite the move in corporate markets. The analysts expect some widening if corporate spreads remain under pressure, but believe the recent credit sell-off has been driven primarily by supply technicals rather than a deterioration in data-center fundamentals.
The regulatory shift coincides with a major push to finance AI computing infrastructure. Nvidia this week announced strategic partnerships with Apollo Global Management, BlackRock, Blackstone, Brookfield Asset Management, Goldman Sachs, and KKR to establish independent compute-financing platforms aimed at mobilizing more than $500 billion in third-party capital for AI infrastructure buildouts. BlackRock chairman and CEO Larry Fink said the AI buildout will require unprecedented investment and a skilled workforce to turn that investment into infrastructure that will help power future growth.
The financing platforms are designed to treat compute infrastructure—and, more meaningfully for Nvidia, AI chips—the way markets already treat commercial real estate or toll roads: as a bankable asset class that can generate income. Nvidia founder and CEO Jensen Huang told CNBC, "This is really the first time that technology chips have become an investable asset class. These are revenue-generating assets now. They're productive, they're long-lived, they're fungible, they're flexible."
While the degree of obsolescence associated with GPUs has fed their reputation as rapidly deteriorating hardware, Nvidia's latest joint effort with the world's largest asset managers pushes back against that criticism. For advisors, the SEC's guidance and the influx of institutional capital into AI infrastructure could open new opportunities in alternative credit and private markets, though they should weigh the risks of a nascent asset class. As tokenized assets gain traction and closed-end funds blend public and private assets, the landscape for alternative investments continues to evolve.
