The slump in AI debt financing has spread to data center commercial mortgage-backed securities (CMBS), with market concerns escalating after Pure Data scrapped a €1 billion bond issuance.

Tech companies are taking on massive debt to fund AI investments, but even in this smaller segment, investor caution toward such debt is growing. According to people familiar with the matter, two of the three recent commercial mortgage-backed securities (CMBS) deals for data center financing were forced to widen their pricing spreads from initial discussed levels to attract sufficient demand, including CMBS issuances from KKR-backed CyrusOne and Blackstone-backed QTS Realty Trust. Meanwhile, the risk premium for data center-linked CMBS has risen broadly over the past 12 months. UK data center operator Pure Data Centres (Pure DC), backed by Oaktree Capital, scrapped its planned record €1 billion bond issuance in mid-July in favor of bank financing. At the time, the company was marketing the unsecured bond, but signs of weakening demand for AI-related data center debt had emerged—compounded by a sharp drop in CoreWeave’s stock and bond prices following news that Meta was building its own cloud infrastructure. Investors grew cautious about terms, and the company ultimately deemed concurrent bank loan terms more favorable, leading it to cancel the bond sale. This pullback has been dubbed the "Luddite trade" by the market: investors now view AI data centers as risky assets comparable to traditional office and retail properties, worrying about overbuilding, tenant concentration, and asset depreciation from technological obsolescence. In contrast to past enthusiasm for AI-themed debt, investors are tightening pricing standards for data center mortgages, demanding higher risk compensation. This trend creates a delicate tension with the AI capital expenditure boom: tech giants are still ramping up investments, but price signals from the debt market are starting to sound a cautious warning.