Singapore-based data center company STT GDC is seeking a SGD 3.1 billion loan (approximately USD 2.4 billion). The company is reportedly planning to invest the money to support its data center growth as it believes that the demand for AI will continue to rise in the next few years.
Latest reports indicate that the company approached Standard Chartered, DBS, UOB and OCBC for the loan. Once the deal is done, the loan will run for three years with an option to extend it for the next two years. The interest rate is reportedly set at 165 basis points above the Singapore Overnight Rate Average.
This move came after STT GDC was acquired by a group led by KKR and Singtel in a SGD 6.6 billion deal this September. STT GDC operates data centers in 12 countries, including India, Japan, South Korea, Malaysia, the UK and Germany. This loan comes at a juncture where technology companies have been spending heavily to meet the growing AI needs.
Building and running data centers requires huge amounts of money. Companies need to invest in land, buildings, power systems, cooling equipment, and computer servers. To meet these costs, many operators are turning to bank loans and other forms of borrowing.
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The major question is whether AI companies will earn enough to support these investments. While data center operators have been spending heavily because they expect demand for AI services to keep rising, none of these investments are risk-free.
If AI companies fail to earn as expected, data center operators may find it harder to repay their loans. Rising debt could also put pressure on their finances. However, the real test will be whether the money earned from AI can match the high infrastructure cost.