US banks raising borrowing costs for private credit funds as AI fears pummel valuations, sources say - Reuters

US banks are raising borrowing costs for private credit funds amid concerns that artificial intelligence investments may be overvalued, according to sources cited by Reuters. Private credit funds have become a major source of lending to companies outside traditional banking channels, but recent market volatility tied to AI valuation concerns has prompted lenders to tighten terms. Higher borrowing costs will increase expenses for these funds and could constrain their ability to deploy capital into new deals. The shift reflects broader market anxiety about whether companies investing heavily in AI infrastructure can generate returns sufficient to justify current valuations. This tightening of credit conditions could ripple through the private markets ecosystem, affecting startups and established companies that rely on private credit as an alternative financing source.