A new insight from Egan-Jones Ratings Company examines the rapid surge in investment into data centers and underscores why credit markets may be more comfortable with this sector than commonly assumed.

Over the past several years, substantial capital has been directed into data center infrastructure as enterprises race to power and deploy artificial intelligence (AI) capabilities. The fundamental question for investors and creditors alike: Are these investments sound — and can a reasonable return be expected? According to Egan-Jones, the answer is bolstered by one significant factor: the strength of obligors behind these projects.

As AI becomes embedded across industries, the need for ultra-fast, high-capacity, low-latency compute infrastructure has accelerated. The report highlights how major technology firms with robust credit profiles are at the forefront of this build-out. This positioning helps mitigate risks often associated with large-scale infrastructure plays.

At the same time, three key concerns are identified:

1. Historic parallels to technology busts – Some observers draw comparisons to the dot-com era, cautioning that while the technology may deliver, not all participants will succeed.
2. Availability of critical resources – Power and cooling (especially water) remain constraints, as data centers demand large amounts of energy and infrastructure expansion often lags.
3. Chip and equipment supply – Though advances have been made (for example, in the production ramp of leading chip makers), supply remains a factor to monitor.

Despite these challenges, Egan-Jones notes that from a creditor’s viewpoint, the most compelling mitigating factor is the creditworthiness of lead obligors. Their ability to meet obligations is “dwarfed” by conventional risks tied to asset performance. Furthermore, demand for data center capacity is outpacing supply — translating into favorable dynamics for those positioned.

In conclusion, while due diligence remains essential and assumptions should be tested, the report suggests the data center space may represent an opportunity where downside risk is limited. The combination of strong obligors, accelerating demand, and constrained supply sets the stage for a bullish outlook.

For more insights, Egan-Jones invites interested parties to explore their full commentary and join their newsletter.

About Egan-Jones Ratings Company

Egan-Jones Ratings Company is a Nationally Recognized Statistical Rating Organization (NRSRO) providing independent, investor-focused credit ratings and analysis. Since its founding in 1995, Egan-Jones has remained dedicated to offering objective credit opinions that enhance transparency and help investors make better-informed decisions.

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Egan-Jones highlights data centers as a sector where credit quality — not hype — may define the next wave of AI infrastructure investment.