JPMorgan Chase & Co. and Goldman Sachs Group Inc. have limited their exposure on a $5 billion loan sale for AI startup Volta Infrastructure Holdings Ltd., amid rising investor demand for higher yields on risky AI-related debt, according to livemint.com. The two banks underwrote a $1.3 billion term loan, while a separate $3.7 billion chip loan was not underwritten, shielding the banks from potential risks.
The banks are leading the loan offering for Volta, a new artificial intelligence cloud company. The $3.7 billion chip loan was structured without underwriting by JPMorgan and Goldman, a rare move intended to protect the lenders from losses if the debt sells below agreed prices or fails to sell. The debt is being marketed with an 11% yield, one of the highest borrowing costs in the leveraged loan market for AI financing. The transaction is unrated, which typically restricts purchases by collateralized loan obligations, the largest buyers of such debt.
This deal highlights growing caution among lenders financing AI ventures, following losses in 2022 when banks were left exposed on underwritten loans. Underwriting entire debt packages is lucrative but risky, as lenders guarantee financing regardless of investor demand. The Volta loan sale reflects a shift in risk appetite as banks seek to avoid similar outcomes by limiting underwriting on large portions of AI-related debt, signaling increased scrutiny in the AI financing market.
Representatives for JPMorgan, Goldman Sachs, and Volta declined to comment on the transaction. The $5 billion loan sale marks one of the largest AI-focused debt financings this year, underscoring the challenges lenders face balancing demand for AI investments with risk management.