The rapid expansion of private credit into the artificial intelligence sector is raising fresh financial stability concerns, with global regulators warning that a market correction could trigger significant losses.

In a new report, the Financial Stability Board said the growing role of private lenders in financing AI infrastructure could amplify risks if the sector cools sharply.

The FSB, which monitors financial authorities and central banks across 24 jurisdictions, cautioned that a downturn in the AI boom may result in “sizeable” losses for private credit investors.

The watchdog found that healthcare, services and technology companies are now the largest borrowers in the private credit market. Within that mix, AI-focused businesses have emerged as major recipients of funding, increasingly relying on private lenders to bankroll datacentres and other capital-intensive infrastructure.

According to the report, AI-related transactions accounted for more than a third of private credit deals in 2025, a sharp rise from 17 per cent over the previous five years.

“This focus on specific sectors may leave private credit funds exposed to idiosyncratic risks … [and] increase exposure to region or industry-specific shocks,” the report said.

On artificial intelligence-linked lending, the Financial Stability Board cautioned that a “sharp correction in asset valuations, which have increased rapidly, could lead to sizeable credit losses to private credit investors.”

The FSB said, “This could be triggered by any significant shortfall in the supply of electricity, a critical factor in the construction and operation of datacentres, which could lead to delays or cancellations of projects.”

Meanwhile, valuations of AI companies could come under pressure if heavy investment results in an oversupply of datacentres that ultimately exceeds demand for artificial intelligence services, reducing expected returns for investors.

The FSB report adds to growing concerns about risky lending practices in the private credit industry. These firms extend loans to companies using money from investors, rather than customer deposits or bank-backed funding, operating outside the traditional regulated banking system.

Those concerns have already triggered significant market reactions, including a multibillion-pound wave of withdrawals from some private credit funds.

In response, certain funds have been forced to impose limits on how much investors can redeem.