Finance
Inside the data center financing boom — and the teams Wall Street is building to win it
Wall Street banks are racing to finance AI data centers, as deals swell into the tens of billions, forcing a rethink of how these projects are funded.
“If you can’t invest a billion dollars, we don’t even want to talk to you,” said Adam Lewis, a managing director at Citizens, a regional lender that has emerged as a key player in the sector. Just a few years ago, a $100 million financing was a milestone; today, it’s a rounding error.
For Lewis, that billion-dollar floor reflects the rising cost of land and electricity, which has pushed these projects beyond the limits of traditional commercial real estate loans and into the realm of large-scale infrastructure finance.
As deal values surge, banks are focused on seizing what could be Wall Street’s largest-ever financing opportunity. Over the past two years, lenders including Morgan Stanley, Goldman Sachs, and JPMorgan have formed integrated teams across disciplines to become fluent in the mechanics of how data centers are actually constructed.
Citigroup estimates the buildout could require $3 trillion by 2030, according to an internal memo sent in late February by leaders of the firm’s investment banking unit. In the memo, senior bankers from across investment banking, corporate banking, and financing said that Citi would establish a dedicated AI infrastructure group to break through internal silos and evaluate “all pockets of capital” as deals grow larger and more complex.
The sheer scale of the AI buildout is beginning to exhaust the cash reserves of the world’s largest tech giants. While hyperscalers cannot afford to fall behind in the infrastructure race, the costs have become too great to carry on their own balance sheets. To Fred Turpin, the global chair of investment banking at JPMorgan, this represents the “largest investment cycle in the history of capitalism.”
To bridge that gap, Turpin helped organize a firmwide working group that pairs technology and energy experts with bankers versed in private capital markets. The approach allows the bank to jump-start projects using its own balance sheet before connecting them to “long-term” capital from sovereign wealth funds, pension funds, and dedicated infrastructure investors looking for stable, generational returns.
Integrated teams
To put together the unprecedented amount of money to build AI infrastructure, bankers are drawing on multiple sources of capital, from bank loans and bonds to private credit and institutional investors, often assembled into a single structure from the outset.
At Goldman Sachs, the shift has taken shape inside its Capital Solutions Group, a unit formed last year to bring together origination, structuring, and capital distribution as deal sizes and complexity have grown. The group pulls in bankers from across investment-grade and high-yield debt, infrastructure and real estate financing, and equity capital markets, allowing the firm to consider multiple financing options at once.
“We’re elbow to elbow with the bankers that cover sponsors so that we can ensure a direct line between our origination efforts and distribution efforts to financial sponsors,” said John Greenwood, a partner who serves as global head of the infrastructure and real asset finance group within Capital Solutions.
Goldman Sachs
At Morgan Stanley, Richard Myers and William Graham, two top investment bankers, are members of a data-center-focused task force launched in 2024. Last year, Myers and his team arranged a $2.6 billion financing for CoreWeave that used Nvidia chips as collateral. They later pioneered a first-of-its-kind $27 billion bond deal for a joint venture between Meta and Blue Owl. That work increasingly requires bringing together specialists from across the bank — from power and project finance to real estate — to arrange multiple sources of capital.
And Graham, the firm’s global cohead of leveraged finance, has led a $3.2 billion senior secured note offering for TeraWulf and a $2.35 billion raise for Applied Digital — two specialized infrastructure firms that have pivoted from crypto mining to hosting the high-density power loads required for AI.
New vocabulary
Unlike traditional corporate financings, data centers sit at the intersection of real estate, energy, and technology, which means bankers have to weigh not just financial risk — but whether a project can actually be built, powered, and brought online as planned. Bankers said they’ve had to become fluent in a new language — the lexicon behind how these massive projects are built.
“We can read electrical diagrams and mechanical diagrams and understand land use permits and power configurations,” said Lewis, the managing director at Citizens, whose team of more than 30 bankers focuses on advising, structuring, and financing data center projects. Bankers are now required to understand what could delay or derail a project, and to give investors confidence that it will actually come online as planned.
“Most of us just assume it happens magically in some ephemeral thing called the cloud,” said Scott Wilcoxen, who leads digital infrastructure investment banking at JPMorgan. “But physically, what that actually means is there is effectively an unbroken physical connection between individual users and the data sources.”
This technical knowledge is ever more important as bankers say projects are increasingly constrained by limits on power, equipment, and labor. But those constraints don’t appear to be cooling demand, raising questions about how far the buildout can stretch — and what it will take to sustain it.
Goldman’s Greenwood noted that in a recent meeting with a client, someone in the room used a surprising adjective: “terrestrial.”
“I was in a meeting last week, and they were talking about terrestrial data centers,” he said, suggesting the next frontier could be “on the bottom of the sea, or in space.”
Inflation has been dominating the headlines. But what most people are actually feeling in their daily lives is something different: affordability pressure.
There’s an important distinction. Inflation measures the rate at which prices are rising. Affordability, on the other hand, reflects whether your income can keep up with the level of those prices. And even as inflation has cooled from its recent peaks, the reality is that many costs have reset higher and stayed there.
That’s why things may still feel tight. Over the past five years, consumer prices have risen more than 20%, according to the Bureau of Labor Statistics. Even in the past year, prices rose about 3.3%, while real wages increased just 0.2%. For many households, incomes are still playing catch-up.
This gap is where affordability pressure lives and it shows up in everyday life.
Affordability and your pocketbook
Housing is often the biggest factor. Roughly one-third of U.S. households are considered “cost-burdened,” meaning they spend more than 30% of their income on housing, according to the U.S. Department of Housing and Urban Development. Add in higher mortgage rates that have more than doubled since their pandemic lows, and the pressure becomes even more pronounced.
It doesn’t stop there. Insurance premiums have climbed. Grocery bills remain elevated. Interest rates on credit cards and auto loans are significantly higher. And many people are still anchoring to what things used to cost, which makes today’s environment feel even more uncomfortable.
In short, affordability stress shows up in your monthly cash flow, not just on paper.
Inflation and your portfolio
Inflation doesn’t impact all investments equally. Cash, while stable in nominal terms, tends to lose purchasing power over time. Longer-term bonds can be sensitive to rising interest rates. Stocks, especially companies with pricing power, may be better positioned to adapt. Real assets like real estate or infrastructure can also provide a degree of inflation resilience.
The takeaway isn’t to overhaul your portfolio every time an economic indicator changes. It’s to build a resilient, all-weather strategy that potentially can outlast it. Maintaining appropriate equity exposure, diversifying across asset types, and managing interest rate sensitivity are all part of that process.
Planning considerations in the current environment
A strong financial plan anticipates how higher costs affect your life. That means shifting the focus from net worth to cash flow. Can your plan absorb higher recurring expenses? Do you have enough flexibility to adjust spending if needed? Are you managing taxes in a way that preserves after-tax income?
Thinking about moving? Keep these realities in mind
For some households, the most powerful affordability lever is changing the cost structure entirely. That’s why many Americans are now considering moves from higher-cost to lower-cost states. Lower housing costs, reduced taxes, and a generally lower cost of living can improve cash flow and reduce the pressure on a financial plan, especially in retirement.
But a move isn’t a guaranteed win.
Transaction costs alone, related to selling a home, buying another and relocating, can take years to recover. Tax differences aren’t always straightforward; lower income taxes may be offset by higher property taxes or insurance costs. Healthcare access and quality vary by region. And lifestyle factors, like proximity to family or community ties, can be just as important as financial ones.
A move that may look good on paper still has to work in real life.
Practical steps you can take now
You don’t need to make dramatic changes to respond to this environment. But making thoughtful, small adjustments can make a difference.
Consider locking in fixed costs where possible, especially when it comes to debt. Review variable expenses, including insurance and subscriptions. Maintain a healthy emergency reserve to absorb unexpected increases. And focus on after-tax income, not just what you earn on paper.
If your plan is solid, you shouldn’t need to overhaul it; you just need to make smart adjustments.
Inflation tells you what is happening in the economy. Affordability tells you what’s happening in your life. And while prices may not be rising as quickly as they were, they’re still higher than they used to be. A well-constructed financial plan accounts for that reality, builds in flexibility, and helps you stay ahead of your cost of living over time.
You may not be able to control inflation, but you can control how prepared your plan is for it.
Bruce Helmer and Peg Webb are financial advisers at Wealth Enhancement Group and co-hosts of “Your Money” on WCCO 830 AM on Sunday mornings. Email Bruce and Peg at yourmoney@wealthenhancement.com. Advisory services offered through Wealth Enhancement Advisory Services LLC, a registered investment adviser and affiliate of Wealth Enhancement Group.
When Anthony Nappa started selling hair products out of the corner of his parents’ warehouse as a teen, he never could have imagined what the side hustle would become. The business has grown from a small eBay store to a multi-million dollar beauty empire that is rapidly expanding its physical presence across Australia.
Founded as a side project in 2012 when Nappa was 19 years old, Oz Hair & Beauty posted $100 million in revenue in the past financial year and now employs more than 500 staff across the country. It has opened 30 new stores in the past three years, with the aim of expanding to 50 stores by the end of the next financial year.
Nappa, now 33, told Yahoo Finance it was a far cry from his original plan when he was a teenager. Back then, he was working part-time as a labourer while studying Commerce at university.
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“My plan was to live at home, study at uni, while I’m studying, save as much money as possible and by the time I graduate, put a down payment on a house and have a graduate job,” he said.
But when his labouring boss suddenly left the country, Nappa found himself out of a job. His parents, Elio and Venessa Nappa, owned a number of Oz Hair hairdressing salons in Sydney, so he decided to start selling the salon’s hair products on eBay.
Nappa invested $10,000 of his savings into the business and saw sales start picking up when he migrated from an eBay store to a proper website and later Shopify.
“Long story short, it really took off. I was working at the back of the warehouse, and then I had to lease the whole warehouse,” he said.
Do you have a story to share? Contact tamika.seeto@yahooinc.com
Growing bricks and mortar presence
It was during the pandemic that business really “boomed”, Nappa said. In 2019, annual revenue sat at about $24 million, but by 2021, turnover had reached $40 million.
In 2021, Oz Hair & Beauty received backing from billionaire Brett Blundy’s BBRC and Daniel Agostinelli, CEO of Accent Group, which runs shoe retail chains like Platypus and Hype.
Nappa said part of the deal included buying his parents’ store in the QVB, which was then rejigged in 2022 into a fully fledged retail store.
“That increased sales by nearly double. So we thought we’ve got something here now,” Nappa said.
At a time when many discretionary retailers are reducing their physical footprints, Oz Hair & Beauty has taken the opposite approach.
The Catalytic Climate Finance Facility (CC Facility), a program jointly managed by Climate Policy Initiative and Convergence, along with the Government of Canada, is hosting an event during London Climate Action Week focused on Scaling Climate Investments in Emerging Markets Using Blended Finance.
The event will explore opportunities and challenges in mobilizing private capital for climate action in emerging markets, including the role of catalytic capital instruments such as grants and technical assistance in scaling innovative blended climate finance solutions. Discussions will draw on practical insights from actual blended climate finance transactions and also highlight key lessons emerging from programs such as the CC Facility, which leverages these instruments to accelerate and scale such solutions. The event will bring together investors, government funders, DFIs and MDBs, philanthropies, climate finance practitioners, and ecosystem partners, and will provide an opportunity to network with key stakeholders across the blended and climate finance ecosystem over drinks.
Due to limited capacity, this is an invite-only event. If you are interested in attending, please register your interest here.
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