Smaller AI Firms Borrow Billions to Fuel Data Center Expansion

As of November 10, 2025, a new trend is emerging in the AI industry: smaller, lesser-known companies are borrowing tens of billions of dollars to build their own massive data centers. This shift comes as the tech giants, which typically self-fund their computing infrastructure, continue to expand their own facilities.

The debt-fueled data center boom is being driven by companies eager to capitalize on the AI boom. In September 2025, Meta agreed to a $14.3 billion deal with CoreWeave to purchase computing power, while Microsoft struck a $19.4 billion agreement with Nebius. These smaller firms are borrowing heavily to fund their data center projects, with CoreWeave saying it must borrow $2.85 for every $5 billion in computing power it plans to sell.

Analysts warn that this debt-heavy approach could backfire if AI technologies do not generate as much revenue as expected in the coming years. The debt used to fund AI data centers could exceed $1 trillion by 2028, accounting for more than a third of all spending on these facilities. There are growing concerns that the smaller, debt-laden companies may not be able to handle the risks they are taking on.

The shift to debt financing for AI data centers is reminiscent of the dot-com boom, when many companies racked up debt to build the infrastructure for the internet. When the bubble burst, numerous companies went bankrupt or had to sell themselves to larger rivals.