AI Data Center Debt May Be Hidden in Conservative Retirement Funds via PIMCO Bonds

A $16 billion AI data center campus in Saline Township, Michigan, reveals how infrastructure debt reaches ordinary investors through bond funds. Developer Related Digital is building the facility to power applications for OpenAI, with Oracle as anchor tenant. PIMCO, managing $2 trillion in assets, is negotiating to provide $14 billion of the debt. This follows PIMCO's $18 billion financing for Meta's Hyperion data center in Louisiana last year. The bonds are structured as 144A securities, included in benchmarks like the Bloomberg Global Aggregate Index, which bond funds track. Americans held $8 trillion in 401k accounts in 2023, with $420 billion in bond funds and target-date funds containing substantial bond holdings. The financing depends on a chain where OpenAI pays Oracle, Oracle pays Related Digital via lease payments, and those service the bonds. Oracle's debt-to-equity ratio is approximately 400%, with some debt off its balance sheet through special purpose vehicles. Risks include OpenAI's profitability, Oracle's cash flows, and hardware obsolescence given AI chips turnover every 2-3 years while bonds have longer maturities. The deal highlights that conservative retirement portfolios may unknowingly hold potentially risky AI debt.