Morgan Stanley "leads" Wall Street in AI debt trading: earning $2.3 billion in revenue in half a year
Morgan Stanley has become Wall Street’s main promoter of building an artificial intelligence financing structure. The bank continues to devise new debt and equity models to channel tens of billions of dollars into the construction of large-scale data centers. The bank has become a leading financing advisor, leading the largest and most innovative AI infrastructure financing projects since last year, according to industry executives.
Morgan Stanley has become Wall Street’s main promoter of building an artificial intelligence financing structure. The bank continues to devise new debt and equity models to channel tens of billions of dollars into the construction of large-scale data centers. The bank has become a leading financing advisor, leading the largest and most innovative AI infrastructure financing projects since last year, according to industry executives. These include the exclusive underwriting of a $3.2 billion bond for data center developer TeraWulf, Meta's $27 billion debt financing program in partnership with Blue Owl to build Hyperion data centers, and most recently advising Broadcom on a $35 billion chip financing deal. The bank's debt and equity capital markets fees surged in the first half to $2.3 billion, up from $1.4 billion in the same period last year, according to LSEG. The performance allowed it to overtake long-time rival Goldman Sachs Group Inc. and move Morgan Stanley into second place behind JPMorgan Chase & Co. in global capital markets revenue rankings, up from fourth the year before. These deals show that artificial intelligence is reshaping not only the technology sector but also capital markets. Rather than relying solely on traditional project finance or corporate lending, bankers are increasingly devising new structural models that package long-term computing contracts and the balance sheets of big tech companies into products that can be sold to mainstream investors. This outcome significantly expands the sources of funding available to fund AI infrastructure while making the financial system more reliant on continued demand for AI computing. According to Silicon Valley technology giants, current computing power is far from meeting customer order needs and expenditures will continue to increase; Morgan Stanley itself predicts that the deployment of artificial intelligence will consume up to 10 trillion US dollars in the next few years. The key to accessing low interest rates and billions of dollars in capital is to partner with very large tech companies—such as Google, Amazon, Meta, and Microsoft—that enter the AI boom with healthy balance sheets. When one of them guarantees a data center lease, financing costs can be roughly halved. William Graham, co-head of Morgan Stanley's leveraged finance business, designed a widely marketable security bond for data center developer TeraWulf, a deal that has become a template for artificial intelligence infrastructure financing. The instrument combines the protections of a project loan and is endorsed by Google. This structure attracts new credit investors such as insurance, asset management companies and pension funds to participate in data center construction financing, allowing TeraWulf to successfully raise $3.2 billion at a yield of 7.75%. TeraWulf Chief Financial Officer Patrick Fleury said the new infrastructure bond allows it to skip the slow, staged lender reviews required to draw traditional project finance loans from banks, while still borrowing at a cost low enough for the business economics to stand. "Effectively, we borrowed against the strength of Google's balance sheet," Fleuryh said.