After Jensen Huangs downfall, heres an even bigger problem that threatens the AI industry

While Wall Street stays riveted by the fall of Jensen Huang, yet another industry threat looms – namely the mountains of debt on the typical AI company’s balance sheet and the fact that financing is starting to run dry, On The Money has learned.Debt financing has been the go-to method for AI players to fuel their wild expansion over the past two years.More than $560 billion of it has been issued worldwide in 2026 alone for data centers, cloud services, chips – all the stuff that goes into AI.But AI executives say the debt spigot has recently been squeezed shut, making it prohibitively pricey even for bigger players in recent weeks.

Not only are many companies being rated below-investment grade, or junk — meaning they have to pay up to sell debt — banks are getting fickle with lending. Indeed, sources tell On The Money that banks are now trying to unload their portfolios of AI data-center loans instead.Teams inside the biggest banks are re-evaluating their portfolios to match current, more dyspeptic market conditions as opposed to those forgone bubble valuations at which the loans were made.“I’ve been working on data center financing since 2021,” said one banker who asked not to be named.

“Every bank is stuffed to the gills with this stuff and looking to dump their portfolios.”Maybe the worst part of the AI correction (or is it the start of a crash?) is that it has little to do with the revelations that Nvidia’s now-ex-CEO had a fling with a woman who the government alleges could also be a spy for the Chinese.In other words, bad news – the AI debt debacle probably isn’t something that can be fixed with better corporate governance at Nvidia. Rather, the problem is more existential and intractable – including all that debt, and fears that company valuations may have amounted to irrational exuberance that seems to have outpaced financial performance. On top of that, anti-AI socialists are now poised to dominate DC policy with the Dems ta...