Morgan Stanley expects widening of data-center ABS spreads

by@business

Summary

Morgan Stanley has projected that spreads on data-center asset-backed securities (ABS) are likely to widen further due to heightened supply pressures related to AI-related debt. This outlook comes as data center operators, facing rising borrowing costs, are increasingly seeking alternative credit options outside of traditional securitized markets. Despite the current perception among investors that AAA data-center ABS spreads are appealing, the expectation remains that these spreads will continue to expand amid evolving financing conditions.

Analysis

Morgan Stanley: Morgan Stanley is a leading global financial services firm offering investment banking, institutional securities, wealth management, and investment management services. Its research and strategy teams regularly analyze credit markets, including asset-backed securities. In a recent October 2026 note, strategists highlighted expectations for further widening in data-center ABS spreads as issuers seek diverse financing channels for AI infrastructure projects. Market Outlook: Morgan Stanley strategists foresee additional spread widening in data-center ABS across the capital structure amid elevated supply pressures in AI-related debt. Financing Trends: Rising borrowing costs in the current rate environment are prompting data center operators to explore alternative credit channels beyond traditional securitized markets. Investor Sentiment: Market participants view current AAA data-center ABS spreads as attractive but anticipate further expansion based on ongoing financing dynamics.

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