- Key insight: Bank of America has joined Morgan Stanley and Goldman Sachs in announcing a huge financing commitment to new data center construction and other infrastructure projects.
- What's at stake: The banks face the risk that the current AI frenzy is a bubble that could burst. They will also be challenged to meet their past promises of environmental friendliness.
- Expert quote: "Bank of America feels a tremendous sense of urgency to get all the investors, banks, developers, corporations, governments and consumers together to build this infrastructure now." — Karen Fang, global head of infrastructure and sustainable finance at Bank of America.
The $250 billion infrastructure spending announcement
"Our energy and power infrastructure is dated," Karen Fang, global head of infrastructure and sustainable finance at
"Every institution, every investor, every corporate has been working for the last couple of years to answer this question: How do we deliver the capital that's necessary for America's competitiveness in the future?"
None of the big banks' announcements happened overnight, Fang pointed out.
"Everyone's been working on this for some time, witness the AI-driven infrastructure [capital expenditure] boom," she said.
What BofA is doing
"That represents one of the largest private sector announcements to date to mobilize within a very condensed short time frame," Fang said. "
The financing encompasses on-balance-sheet lending, project finance bonds and project level capital including equity and debt in the public and private markets, Fang said.
For some data center projects, the bank is helping developers raise greenfield capital – funds used to secure permits, equipment, labor contracts and offtake contracts (agreements between producers and buyers) for data centers. Other projects involve constructing, upgrading and modernizing infrastructure such as roads, ports and water infrastructure.
In one transaction that closed this April and therefore counts toward the $250 billion,
Staying sustainable
In 2024,
Fang said the fact that she runs both infrastructure investment and sustainable finance shows the bank's "corporate dedication to a cleaner and lower-carbon economy. At the same time, we understand energy security and affordability is really important. We need both. We need renewable energy and batteries, which are clean, fast and cheap. We also need gas power generation and potentially nuclear generation and advanced geothermal down the road."
According to Fang, the bank is supporting several renewable energy and storage projects that contribute to its 10-year, $1.5 trillion sustainable finance goal.
Read more:
The top-performing 20 public banks with under $2B of assets in 2025 The top-performing banks with $2B to $10B of assets in 2025 'The data has to be perfect': BofA CEO Moynihan on AI Should a bank ever be liable when a customer gets scammed?
In each local market where infrastructure projects are being financed, environmental factors like water usage have to be considered as well as the impact on neighborhoods, she said.
For the data center in Saline Township, Michigan, developer Related Digital and Blackstone are rebuilding a neighborhood recreational center and have paid for new fire trucks. They promised local Detroit Edison customers their power bills would not increase for the next 10 to 15 years because Oracle and OpenAI are paying for the power and substation upgrades and for the batteries that provide excess power.
The data center will use a closed-loop water cooling system that Fang says will use less water than an office building or a comparable farm.
"That's a good example of how we think about projects done the right way with communities engaged," she said. "If the communities don't love it, the project isn't viable for the long term."
It makes sense that people are coming up with more efficient designs and recycling water, not only to help the climate, but just to keep costs low, said Steve Rubinow, former chief information officer at the New York Stock Exchange and current associate teaching professor at the Illinois Institute of Technology.
"On the flip side, I saw a news story this week that said the levels of water in Lake Mead and Lake Powell are the lowest on record," Rubinow told American Banker. "So it's great that we're using less water than [in the past], but in some parts of the country, there's not a lot of water to go around. So you can use water for agriculture, you can use water for residential systems, and now you can use water for infrastructure. And it's great if it's hyper efficient, but at what point do you say there's too many people with their hands out for water — we don't have enough for everybody."
Is AI infrastructure investment a bubble?
Some pundits, analysts and investors worry that the recent flurry of investment in data center infrastructure to support the skyrocketing use of AI is a bubble that will eventually burst.
Fang pointed out that less than 20% of announced data center or chip financing projects are actually being constructed and delivered.
"There is a natural speed bump, because you need community support, you need energy permitting, you need interconnection into the grid, you need labor, you need advanced orders on equipment, such as gas turbines, transformers and switchgear," Fang said. "All these things we need to build a data center aren't readily available. The supply chain is actually quite limited. So it may seem like there is a frenzy, but the reality is that the natural constraints in physical world infrastructure are naturally curbing the speed."
She further pointed out that AI is not something that can be walked back.
"To me, it's like the internet or iPhone," Fang said. "I can't go back and think about not having these tools anymore. Enterprise spending is going to take over once the tools are developed to a point where they're proficient and they don't hallucinate anymore. The infrastructure development is absolutely necessary."
At Morgan Stanley, Chief Investment Officer Lisa Shalett thinks the boom in spending will continue, though there may be overbuilding of data centers.
"Whenever there's growth and there's opportunity and there's liquidity and there's ample availability of capital, it chases the highest growth and highest return opportunities, and so we will at some point overbuild what's needed, and then we'll have indigestion," Shalett told American Banker in a recent interview.
