Sources: JPMorgan and Goldman, leading a $5B loan sale with a yield of ~11% for AI startup Volta, took a rare move to limit exposure by underwriting just $1.3B

The cost to borrow for AI startups just increased significantly.

JPMorgan and Goldman Sachs, leading a syndicate of banks, have agreed to provide a $5 billion loan to AI startup Volta. The loan carries a high yield of approximately 11%. In a notable move to mitigate their risk, the two lead banks have decided to underwrite only $1.3 billion of the total loan amount. This means they are seeking to sell off the remaining $3.7 billion to other investors.

The decision by JPMorgan and Goldman Sachs to underwrite only a portion of the $5 billion loan to Volta signals a growing caution among major financial institutions regarding the high valuations and funding needs of AI companies. The elevated yield of ~11% suggests that Volta, despite its AI focus, is perceived as a riskier borrower, necessitating a higher return for lenders. This move could indicate a broader trend of tightened credit conditions for high-growth tech firms, even those in the booming AI sector, as the market recalibrates risk appetite.

This development could make it more challenging and expensive for other AI startups to secure large-scale financing, potentially slowing down their expansion plans or forcing them to accept less favorable terms. Investors participating in the secondary sale of this loan will be closely watching Volta's performance and the broader AI market's trajectory to assess their risk. The banks' strategy of syndicating a significant portion of the loan aims to distribute risk but also highlights the market's current appetite for such deals.