Deutsche Bank is exploring ways to hedge its exposure to data centers

Deutsche Bank is examining methods to protect itself from risks tied to data-centre lending, after committing several billion dollars in loans to support the surge in artificial intelligence and cloud-computing demand.

Inside the bank, senior leaders have been debating how to manage the growing exposure as major tech groups — the hyperscalers — commit massive capital to digital infrastructure for AI projects, much of it financed with borrowed money.

One option being considered is to short a group of AI-linked shares, using potential declines in those companies to offset losses if the market turns. Another possibility is to use derivatives to buy default protection on some of the loans, via a structure known as a synthetic risk transfer (SRT).

A spokesperson for Deutsche Bank declined to comment.

According to a senior executive, the bank’s investment-banking division has made a significant push into financing data-centre buildouts.

But the speed and scale of spending on AI infrastructure has raised concerns. Some critics warn that the enthusiasm resembles the dot-com period, with huge sums being invested into a space that lacks a proven track record. They also note that equipment in the sector becomes obsolete quickly due to rapid technological changes.

Deutsche’s lending has largely focused on companies that provide services to hyperscalers such as Alphabet, Microsoft, and Amazon, with loans backed by long-term contracts that are expected to generate stable returns, according to two individuals familiar with the matter.

Recently, the bank helped provide financing to Sweden-based EcoDataCenter and Canadian firm 5C, which collectively secured more than $1bn to support their growth. While Deutsche does not publicly disclose its total lending to the sector, estimates suggest the figure is in the billions.