The news: The AI boom is driving massive demand for data centers, which cost tens to hundreds of billions to build. That’s where big banks come in, having collectively lent billions to the companies building them, per BigGo Finance. The concern is that these loans are too concentrated, leaving banks exposed to heightened risk.

Zoom out: Oracle’s roughly $300 billion partnership with OpenAI and the subsequent buildout of data centers across the US pushed banks to their limits, per the Wall Street Journal. Normally, banks would spread risk by selling pieces of the humongous loans to other investors. But in this case, the deals were so large and heavily tied to Oracle that many buyers couldn’t take on more exposure. That left banks stuck holding more of the debt than expected.

Because banks have strict limits on how much they can lend to one company, this “stuck” debt is limiting their ability to fund new AI projects. Even though demand for AI infrastructure is booming, banks may not be able to keep up, pushing more financing to private investors and potentially making projects more expensive by tying up capital.

Why it matters: Local opposition to data centers—which can delay or block projects—is growing, per The New York Times. If a project is forced to slow down, costs rise and timelines stretch; if it gets canceled, the underlying loan becomes riskier. Since data center loans are large and concentrated, even a few disrupted projects could meaningfully affect a bank’s exposure. That’s especially true during the construction phase, when risk is highest.

More broadly, growing backlash introduces policy and regulatory uncertainty. For example, Maine is on track to become the first state to at least temporarily ban the construction of large data centers, per Maine Public. If more states or localities start restricting data centers, it will become harder to predict which projects will get built. 

Implications for banks: That uncertainty can lead to tighter lending standards, higher pricing, or pulling back altogether—because the risk isn’t just financial anymore, it’s political and environmental, too. In the near term, banks will likely push harder to offload risk—some of it at a discount. But longer term, banks will also give up a bigger share of the business. Private credit funds, insurers, and other nonbank lenders will step in to hold the loans and earn the higher returns—especially since they’re less constrained by capital rules and concentration limits—while banks focus on originating and structuring loans.