A data-center order book is also a credit exposure

For an owner selling or refinancing a business that has grown on data-center work, October's news is a reason to prepare a different first answer for buyers and lenders. Under the heading of leverage and circular financing, the IMF's October 13 summary of its Global Financial Stability Report cited a review of 14 transactions since 2023 with about $300 billion of equity investment and $650 billion of debt, in exchange for $1.4 trillion of future revenue commitments.^[1] The Federal Reserve's Beige Book, published the next day, still described data-center construction as a source of growth in several Districts.^[2] Demand is not the open question. Our transaction conclusion is specific: value the order book together with the funding behind each project, and show evidence of both.

More of the buildout is borrowed

The financing has moved toward credit. J.P. Morgan Asset Management reported on August 20 that the largest cloud companies had issued $219 billion of investment-grade bonds so far this year.^[3] It estimated that their operating cash flow, together with general equity issuance, would cover only around a quarter of cumulative AI-related investment, which it put at $5.5 trillion by 2030.^[3] The BIS reported in June that direct lending funds had quadrupled their lending to AI and information technology over five years, to about 15% of their portfolios.^[4]

Markets reacted to the price of that borrowing this month. On October 14, information technology was the weakest sector of the S&P 500, down 3.00%, after an inflation report raised the prospect of another rate increase.^[5] CNN reported the next day that the report had bolstered worries that rising interest rates would make AI investment more expensive to fund.^[6] Investment-grade issuance by large, cash-generating companies is not distress, and one day's price move is not a forecast of spending. The point for a supplier is narrower: more of its customers' projects now depend on lenders' terms.

The supplier carries the timing

That dependence reaches suppliers through payment timing. J.P. Morgan's July 15 analysis found that the buildout is extending cash conversion cycles for industrial suppliers, which are asked to procure earlier, offer competitive payment terms and absorb schedule changes.^[7] It concluded that for many suppliers the constraint is no longer demand but balance sheet capacity.^[7]

Schedules are moving as well. Forbes, reporting a September 25 filing to federal regulators by PJM's independent market monitor, said 4,016.9 megawatts of data-center load had been canceled or delayed as of September 21, or 42% of the growth PJM had forecast between its 2026/27 and 2028/29 delivery years.^[8] In the Beige Book, a contractor in the Cleveland District reported that a local moratorium had led to the cancellation of a data-center project, and the Kansas City District report said the buildout had crowded out other production.^[2] These are one grid region's figures and individual contacts' reports, not a national count, and a delayed project may still proceed. The BIS described the broader risk in June: if the largest cloud companies slowed or halted their capital spending, many borrowers across the supply chain could struggle to replace lost revenue and service their debt.^[4]

Put the funding in the diligence file

Start with a schedule of revenue and backlog by end customer and project, not only by the contractor or distributor that pays the invoice. For each material project, record who owns it, what the seller can document about its funding, permits and power connection, and how far construction has progressed. Mark the projects whose financing or approvals are still pending.

Then show the cash. Age receivables by customer, show the time from each billing milestone to payment over recent quarters, and identify inventory bought ahead of specific orders. Review the contract terms that move risk to the supplier, including suspension, termination for convenience, force majeure, retention and cancellation charges for custom equipment, and have counsel confirm what each one permits.

For the financing, size the revolving line to the longer cycle rather than the historical one, and ask the lender to confirm in writing how receivables from the largest customers count toward the borrowing base. A buyer can then price projects with funding in place differently from projects still waiting for it. That lets the funded part of the book be valued on its own evidence, without asking either side to forecast the buildout.