Morgan Stanley: AI-linked leveraged finance to stay subdued, bar for new deals rises

The concentration of October's AI-linked leveraged issuance in a single borrower, at a yield above 11%, underscores how selective this market has become: lenders are pricing construction and execution risk rather than AI demand itself. Morgan Stanley's subdued outlook matters most for infrastructure developers and private credit funds that had treated AI as a reliable issuance theme, since a higher bar effectively narrows the borrower pool to those able to absorb elevated financing costs. Whether Volta's term loan serves as a template or a cautionary outlier is the open question, particularly if construction timelines slip further.