According to a Morgan Stanley research report, investors hope to achieve partial or full deleveraging during the life of bonds, and data center asset-backed securities transactions may require structural adjustments. Strategists Carolyn Campbell, James Egan, and Vishwanath Tirupattur wrote in the report that we believe that the decline in investors' confidence in the overall AI narrative is not the reason for weakening demand for ABS in data centers. In our opinion, the data center securitized credit market is clearly becoming saturated. At least the current transaction structure and asset characteristics have reached this stage. In the short term, data center issuers are likely to still operate within the existing master trust framework, launch transactions with lower loan value ratios and shorter terms, and issue bonds at obvious discounts. Interest spreads are likely to continue to widen, but current levels are attractive, and short-term varieties are particularly prominent. Among the various targets in the fixed income market, data centers issue ABS independently; even if interest spreads are higher than other ABS bonds, they may not automatically attract new demand. For issuers, the pressure on the benchmark interest rate may be even greater.

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