Big Tech might be betting your retirement savings on AI

Ordinary Americans are likely already financing data center debt through the most conservative corners of their retirement savings — without even knowing

Michael Nagle/Bloomberg via Getty Images

Last week, two numbers landed regarding a single AI data center campus in Saline Township, Michigan — numbers that could turn out to be a much larger story.

The project is being built by developer Related Digital to power applications for OpenAI, with Oracle $ORCL as its anchor tenant. The price tag for it all has leaped to $16 billion, up from $10 billion estimated just last fall. Also in the mix: PIMCO, one of the world's largest bond fund managers, which is in talks to provide $14 billion of that $16 billion as debt.

But the ballooning cost isn’t the most noteworthy aspect of the deal. Nor is the "twisty" history of the financing, which, according to Bloomberg reporting, has involved months of "stop-and-start" negotiations, amid increased scrutiny of Oracle’s credit worthiness.

What’s truly noteworthy is the light the deal shines on AI data-center debt and how it can find its way into retail investors’ portfolios — specifically, their retirement savings — without their realizing it. This can also happen via bond funds, which most everyday people regard as the “safe” end of the market, a world away from risky tech bets or direct AI plays like, say, Nvidia $NVDA.

However they’re perceived, bond funds represent a huge market and a significant chunk of millions of Americans’ retirement saving. Per the Investment Company Institute, Americans held some $8 trillion in 401k accounts as of 2023, roughly $420 billion of which was held in bond funds, which make up a little over 5% of 401k assets in general, while the percentage skews higher in older workers’ portfolios. Crucially, however, the $420 billion figure doesn’t take into account target-date funds, which make up over 40% of total 401k holdings and have substantial bond holdings that increase as the target date approaches.

What the Michigan data-center deal highlights is a little-discussed aspect of the larger AI buildout itself: that some of this data-center debt can find its way into incredibly widely held bond funds. In other........

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