For Goldman’s Top Bankers, It’s All AI Data Centers All the Time
(Bloomberg) — For leveraged finance practitioners, AI is the only game in town, especially in the absence of more debt deals to finance mergers and acquisitions.
The trillions of dollars needed to finance technology’s data centers and energy infrastructure dominated discussions at Goldman Sachs Group Inc.’s 11th annual leveraged finance and credit conference in Dana Point, California, last week.
American Airlines Group Inc. and Caesars Entertainment Inc. as well as Applied Digital Corp. and Cipher Digital Inc. More than 400 investment managers and 85 borrowers, including those from near-AI companies such as , descended on Waldorf Astoria’s Monarch Beach resort. AI excitement kept the mood buoyant despite lukewarm M&A returns, high interest rates and ongoing concern about the Iran conflict.
The numbers supporting the AI complex are staggering. As companies raise more than $20 billion in the U.S. junk bond market in the past two months alone, blue-chip firms are looking abroad to expand access to financing. In one of the most striking developments in the market, Apollo Global Management Inc. and Blackstone Inc. are urging more investors in a $36 billion deal to help build AI infrastructure by Anthropic PBC. PBC also said it secretly submitted draft paperwork for the public listing on Monday.
“There’s such a huge need for capex across data centers, power, and chips that it’s so large that it really touches every market we’re involved in,” Miriam Wheeler, global head of leveraged finance at Goldman Sachs, said in an interview. “For our capital solutions group, AI is probably the number one theme we’re spending time on right now.”
Currently, most corporate bonds issued for AI facilities are trading at nearly the same levels. However, as supply saturates the market, bankers warn that a classification mechanism is coming. For example, bond prices will begin to diverge if borrowers miss construction targets for data centers.
“You’re going to get to a point where those who lag in implementation will see it in their cost of capital,” Chris Bonner, Goldman’s head of leveraged finance for the Americas, said in an interview. He added that it was “surprising” how much money continues to be needed in the AI ecosystem. “I don’t see this slowing down anytime soon.”
Despite AI enthusiasm, Wall Street is still clamoring for a return to traditional mergers and acquisitions. The acquisition of Electronic Arts Inc. and the acquisition of Paramount Skydance Corp. by Warner Bros. While major debt deals, such as the planned acquisition of Discovery Inc., have increased supply, a consistent flow of transactions remains elusive.
“We would all like to see a little more exports,” Bonner told the conference audience in his opening remarks.
The hunger for non-AI deals is fueled by Caesars’ Fertitta Entertainment Inc. The announcement that it had accepted to be acquired by the company became a matter of great controversy. Goldman and Morgan Stanley are leading the $5.7 billion transaction, backed by eight other banks. Caesars Chief Financial Officer Bret Yunker even attended the conference and answered investors’ questions in private meetings.
There were many more nets on the sidelines. Before official proceedings began, some conference attendees attended a standalone event hosted by Houlihan Lokey at the Waldorf Astoria’s Bourbon Steak restaurant and bar. Goldman himself hosted a closed party, according to people who attended the event.
In the main hall, the broader upside of deals with private equity remained a hot topic for the second year in a row. Tim Ingrassia, Goldman Co-Head of global mergers and acquisitions, spoke to the crowd about the deal-making outlook at a lunch buffet of mahi-mahi, crumbled chicken, lemon potatoes and gnocchi. Corporate mergers and acquisitions and large acquisitions are currently keeping the market afloat; Medium-sized private equity transactions remain slow.
Still, bankers remain characteristically optimistic that the tide will turn.
“Debt markets are certainly constructive in both size and pricing, maybe there’s a little asterisk for last week’s move in interest rates, but we think this backdrop is certainly conducive for further deal activity,” Wheeler said.
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