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Happy Wednesday! The longer I cover the money behind AI, the more I learn about new markets opening up to data center developers or operators, chip manufacturers and others looking for money to build ambitious AI projects. That’s what makes this job so interesting. For the past several months, I’ve been wondering about a market I keep hearing referred to by the Securities Act of 1933 rule that governs it: Rule 144A. One banker called the market “a new tool in the toolkit” for data center developers. So what’s going on exactly? The simple answer, at least in securities law terms, is that Rule 144A provides a safe harbor for the resale of privately placed securities. It effectively creates a market with many of the perks of a public bond or equity sale. Unlike a traditional private placement, these securities can be traded between sophisticated investors even though they’re not registered for public sale. Data center developers sell the securities to investment banks, who immediately resell them, under the shelter of the safe harbor, to institutional investors managing $100 million or more in assets. Smaller investors are off-limits, but the additional liquidity can help developers raise money on better terms while still avoiding the full public disclosure process. At least three publicly traded data center developers tapped it in June alone, some returning for their second or third helping of fresh financing for new data center projects. While the market is hardly a secret to Wall Street bankers, it remains mostly invisible to the public. One banker I talked to about these deals called it “the biggest market you’ve never heard about.” Exact numbers are tough to come by. According to one estimate, the investment-grade portion of the 144A market is roughly $3.5 trillion in size. That’s still less than half the $8 trillion in Securities and Exchange Commission–registered U.S. investment-grade bonds. Companies with non–investment-grade ratings on their debt also tap the 144A market, as do equity issuers. Some $448 billion of 144A debt has been sold this year, putting it on track to surpass last year's total of $615 billion, according to data provided by the Securities Industry and Financial Markets Association. Meta Platforms raised $27 billion last October by issuing 144A bonds through a joint venture it formed with Blue Owl, Beignet Investor LLC, to fund a data center development in Richland Parish, La. Bond giant Pimco bought about $18 billion of the bonds and parceled that out to its various funds and other partners. The deal made a splash, though most of the attention was on its size and joint venture structure rather than the market into which the bonds sold. Data center developers didn’t miss the deal’s significance, and with the help of their bankers, TeraWulf, Cipher Mining, Applied Digital and others soon followed suit, raising billions of dollars through 144A private placements. Late last month, Sharon AI, the Australia-based neocloud, used the market to sell convertible notes. Since May 2025, data center developers or neoclouds have issued $71.9 billion across 26 transactions in the 144A private placement market, according to Dealogic data. JPMorgan, Morgan Stanley and Goldman Sachs count among the busiest banks helping them. Clearly the market is big enough to swallow a large chunk of the massive capital needed for AI infrastructure. What’s more intriguing is why companies like Meta, Blue Owl and TeraWulf, which already have access to public markets, are turning to private placements in the first place. Historically, if a company wanted to build a data center, it could get a construction loan from a bank or a collection of banks, or it could turn to project finance lenders. That model worked for established developers with a strong track record; the banks that make loans in those markets are willing to take construction risk, but they generally don’t like to take chances on unproven developers. More recently, many smaller, AI-focused developers have created webs of subsidiaries below their parent companies to hold individual data center projects. Meta too has created special purpose vehicles. Those structures help isolate risk from the parent companies, but they also leave the project vehicles with no track record and potentially limit lenders’ ability to seek repayment if things go south. A company like Meta could likely still arrange financing to build a data center, but it would be tougher for former bitcoin miners turned AI data center developers to do so, one of the bankers said. That’s where the 144A market comes in, giving the entities a way to tap bond markets to finance big projects without issuing registered public debt. One banker described it as a “market of necessity,” not choice. In such a structure, the 144A debt is backed by cash flows coming from the ultimate tenant of the finished data center, in many cases a large hyperscaler or leading AI lab. With that backing, institutional investors can get comfortable with buying the private placement debt. Tapping the capital markets in this way allows issuers to access more leverage, according to David de Boltz, a managing director in technology leveraged finance at JPMorgan. Some of the 144A private placements have allowed for borrowing of up to 90% to 95% of the project’s cost, meaning developers only need to put up a relatively small amount in equity. That compares to project finance loans that more typically cap the leverage at 60 to 80 cents of every dollar in project cost. “What that means is you do not need to go and raise too much equity to finance these projects,” he said. These bonds also let issuers move quickly, since many project finance loans take more time to negotiate, and it allows borrowers to provide just enough financial disclosure to get investors on board. In the case of an SPV or a subsidiary, investors might only get financial data on that entity and how it planned to repay its debt, rather than getting the broader picture of the parent company. The 144A route doesn’t come without downsides. Private placements are excluded from bond indices such as the Bloomberg U.S. Aggregate Bond Index, which means index-tracking investors aren’t required to buy them. Other investors may have mandates that don’t let them buy private placements at all, further limiting potential buyers. The market seems to have plenty of demand for now, with issuers able to offer relatively cheap borrowing rates. Meta’s Beignet Investor issuance carried a coupon of 6.6%, or just a percentage point above Meta’s outstanding corporate bonds. The debt issued by TeraWulf and Cipher Mining carried coupons that weren’t much higher than the Beignet debt. De Boltz said the returns have been attractive for bond investors, who have been bidding up the value of the debt after it’s issued. Data center debt has returned some 10% and 11% so far this year, which translates to a 20% annual return, he said. If returns fall closer to 4% to 5%, investors may step back, he said, but aside from a few isolated incidents there hasn’t been much evidence of that. Investors like “the risk and more and more people are buying the product,” he said. While the market is working well for issuers, it does carry risks for investors due to the limited disclosure the borrowers provide. There’s also the fact that the bonds are often bought by mutual funds even though retail investors can’t buy them directly, which could draw broader scrutiny if data center developments sour. The Pimco Income Fund, for example, held $4.2 billion of the Beignet Investor bonds at the end of March, accounting for 1.88% of the portfolio, according to public Pimco disclosures. Roughly a third of the fund’s assets are in share classes marketed to retail investors. The Bridge Builder Core Plus Bond Fund, which is only available to clients of the Edward Jones retail brokerage, held $268 million at the end of March, or 0.58% of the portfolio. That creep into retail points to a broader issue with using the 144A market as a work-around. AI companies have found an insatiable need to source funding wherever it may lead them, and lines are blurring as public markets go private while tech startups piggyback off public companies’ access to capital. The question now is whether the broader market appetite for AI financing will finally hit its limit.
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