The Bank of England (BOE) has launched an investigation into the growing trend of financiers lending to data centers as a means to capitalize on the expanding artificial intelligence (AI) sector, according to a report by Bloomberg.
In recent months, the UK’s central bank has been assessing potential market vulnerabilities linked to inflated valuations in AI-related companies. The BOE has expressed concerns that a sharp correction could occur, drawing parallels to the dot-com bubble burst in the early 2000s.
Expanding its focus, the BOE is now scrutinizing the financial connections between AI enterprises and lenders who are increasingly channeling funds into data center infrastructure. These data centers provide the critical backbone for AI systems, and lending for their construction is emerging as a unique yet significant funding avenue.
Though still considered niche, lending for data centers is expected to gain prominence, with consulting firm McKinsey & Company estimating a need for approximately $6.7 trillion by 2030 to meet the surging demand for AI computing power.
According to Bloomberg, the BOE’s inquiry was prompted by noticeable shifts in investment patterns — from prioritizing staff recruitment to allocating substantial capital toward building data centers. These shifts highlight a strategic move by investors eager to gain exposure to the AI market, especially given the limited availability of AI-specific publicly traded stocks and the absence of scalable crypto-based tokenization of private AI ventures.
However, the Bank of England’s investigation raises the possibility of future regulatory constraints on lending practices tied to data centers. Such measures could potentially temper investment returns and influence the pace of innovation within the AI sector.
Separately, the BOE has faced criticism from UK crypto advocacy groups regarding proposed limits on individual stablecoin holdings, which would range between £10,000 and £20,000. Critics argue these caps are excessively restrictive and complex to enforce. While the BOE has clarified these restrictions are not intended to be permanent, banks in the UK have independently adopted precautionary actions. A recent survey found that approximately 40% of crypto investors reported their banks either delaying or blocking transactions to cryptocurrency service providers.
The Bank’s primary rationale for close monitoring of data center lending stems from concerns about financial stability. The BOE highlighted that if debt-financed investments into AI and the necessary energy infrastructure expand as projected over the coming decade, risks to financial stability could escalate.
These risks could manifest through direct bank exposures via loans to AI companies, as well as indirectly through credit extended to private credit funds and other financial entities invested in AI-related assets, the BOE noted.
This development underscores the complex landscape regulators face as they balance fostering innovation in rapidly evolving technology sectors with safeguarding financial systems.
