Davis Polk partner and Infrastructure Finance practice co-head David Penna and partner Brian Hirsch were quoted in 9fin discussing risks and opportunities in data center financing.

The piece noted that last year, hyperscalers (massive single-tenant structures) alone represented a $30 billion original opportunity that is expected to double in 2025.

“I do think there are going to be massive capital deployment opportunities,” David said.

Starting in 2026, tens of billions of dollars of construction financing will mature and require refinancing, thus demanding capital from “every pension fund, every insurance investor,” he added.

The article noted that data centers typically go to the ABS market for financings. However, David noted that when faced with the tens of billions required, “There’s no way the ABS market can absorb all of that. It’s just not big enough.”

Discussing potential risks in financing data centers, Brian said, “Data center leases have historically allowed tenants to terminate their lease with significantly more flexible terms than normal real estate deals allow.”

“The market was incredibly tenant-friendly, and people just had to accept that tenants had walk rights,” he added. “I’m seeing more and more push back from people and an acceptance of the push back in part because there’s a realization that the cost of capital will be lower for everybody if it doesn’t have some of these features.”

“The AI house that private credit built,” 9fin (September 4, 2025) (subscription required)

Copy link to share post