Wall Street's banks wrote $113 billion in AI loans and bonds in June. They wrote $23 billion in September, an 80 percent drop in three months1.
Oracle's loans for a data center in New Mexico traded at 89 cents on the dollar that same month. Buyers wanted a discount to hold them1. Rising rates and doubts about data center economics did the rest1.
Read quickly, the story sounds simple. Wall Street is losing faith in AI, and banks are pulling back before the boom turns bad. Executives said versions of that story on four separate earnings calls this month. A tired headline could stop right there.
Wall Street's AI debt issuance falls 80 percent in three months
Global AI-related debt issuance, billions of dollars, Morgan Stanley data reported in June and September 2026
Each column is one month's AI-related debt issuance; the September column stands about a fifth as tall as June's.
Source: KuCoin News [1]. Chart by The AILately.com Desk.
The numbers behind this chart
| Item | Value |
|---|---|
| June | $113B |
| Sept. | $23B |
The math argues otherwise. Companies raised $466 billion in AI debt through September, more than four times their pace over the same months in 20251. The pullback kept that pile the same size. It moved who holds it, and who answers when a data center misses a payment.
Investment banking has a word for passing debt somewhere else: syndication. Banks collect the fee for arranging a loan, then sell most of it to other investors before the risk lands on their books.
That habit built the mortgage market that broke in 2008. Banks bundled home loans and sold the bundles to pension funds and insurers holding paper on strangers. AI debt is moving the same way, from banks into pension and insurance portfolios, only faster.
Goldman Sachs CEO David Solomon explained the bank's new caution on an earnings call this month. "While we are proud of the privileged position we play in the AI investment cycle, no one knows how the demands for capital and compute will evolve as the broader AI ecosystem matures," he said2. Solomon's own bank still arranges the loans. It just keeps fewer of them.
JPMorgan Chief Executive Jamie Dimon said something close to the same thing, the same week. "I am not going to give you very specific stuff, but we are tightening up a little bit on credit," he told analysts on an earnings call3. Pressed on leverage building up around AI financing, Dimon added, "They are not wrong because there is a lot of leverage in some of this stuff"3.
Private credit funds filled the space banks left behind. Blackstone, Apollo, and Carlyle now hold AI loans that once sat on bank balance sheets4. The loans finance chips and data centers banks grew wary of. Carlyle's own co-president, Mark Jenkins, warned that the shift builds a different kind of risk4.
Jenkins said financings that look spread across data centers, chips, and investment vehicles often rest on the same seven or eight lenders4. "In a crisis scenario, all of those things are going to really, really matter," he said. "They don't matter when everything's going well"4. He was pointing at the investors now standing where banks used to stand.
That seven-or-eight-lender problem sits mostly off a bank's own balance sheet now. The European Central Bank modeled what a private credit shock does to each kind of lender holding it.
Insurers hold 2.3 percent of their assets in private credit5. Pension funds hold 1.4 percent, and banks hold just 0.2 percent5. Banks' own losses in that scenario stay under 1.3 percent of equity, because their claims sit senior to everyone else's5.
Insurers hold 2.3 percent of assets in private credit, over ten times banks' share
Euro area exposure to private credit by sector, as a share of each sector's own total assets, ECB stress test, 2026
Each bar is one sector's exposure to private credit as a share of its own total assets; insurers carry the largest share, banks the smallest.
Banks' claims sit senior to insurers' and pension funds', so an equal-sized exposure still costs banks less in a downturn.
Source: Insurance Journal [5]. Chart by The AILately.com Desk.
The numbers behind this chart
| Item | Value |
|---|---|
| Insurers | 2.3% |
| Pension funds | 1.4% |
| Banks | 0.2% |
Banks still earn a fee for arranging each loan. They skip holding the loan once it closes. The profit stays on Wall Street. Pension offices in Ohio, and insurers in Frankfurt, take on the exposure.
Investment banking has always survived by passing risk to whoever will carry it for a price. For a century that meant other banks, bond buyers, and markets built to spread a loss around.
Now it increasingly means a retirement fund that learns what it owns only after a shock arrives. That is the same lesson 2008 taught, and the industry filed it away. The people who run that retirement fund rarely work anywhere near Wall Street.
September's drop left out half the story. Banks kept the fee. Pension funds and insurers kept the loan.
The AI boom kept its risk the same size. It only changed hands.
Readers who want AI's financing news traced to where the money sits can get it from The Signal, AI Lately's daily email. Sign up, and learn who holds the next loan before your pension fund does.
Sources
- Coinpaper, "AI Debt Issuance Drops 80% to $23B, Oracle Loans Trade Below Par," KuCoin News, Oct. 11, 2026, https://www.kucoin.com/news/flash/ai-debt-issuance-drops-80-to-23b-oracle-loans-trade-below-par
- Reuters, "As Wall Street banks finance and adopt AI, risks mount on both fronts," Reuters, Oct. 14, 2026, https://www.bnnbloomberg.ca/business/artificial-intelligence/2026/10/14/as-wall-street-banks-finance-and-adopt-ai-risks-mount-on-both-fronts/
- JPMorgan Chase, "JPMorgan Chase (JPM) Q3 2026 Earnings Call Transcript & Audio," StockAnalysis.com, Oct. 13, 2026, https://stockanalysis.com/stocks/jpm/transcripts/686357-q3-2026/
- Private Debt News, "Private Credit News Weekly Issue #110: Carlyle Says AI Could Be 'The Biggest Mistake of All'," Private Debt News, Oct. 4, 2026, https://www.privatedebtnews.org/p/private-credit-news-weekly-issue-2ee
- Nicholas Comfort, "Private Credit Losses May Hit Insurers More Than Banks, ECB Says," Insurance Journal, May 26, 2026, https://www.insurancejournal.com/news/international/2026/05/26/871275.htm