Goldman Sachs aims to share the "AI infrastructure" big cake: forming a dedicated team to finance global data center infrastructure

Goldman Sachs is expanding its infrastructure financing business by forming a dedicated team to capture a larger share of the AI infrastructure financing market. The Wall Street giant is betting on the data center construction boom brought about by the AI wave.

On October 17th, according to media reports, Goldman Sachs has created a new team within its Global Banking and Markets division focused on global infrastructure financing, with a particular emphasis on financing needs in areas such as AI data centers, power facilities, and processors required for AI construction.

This adjustment reflects the surge in financing demand for AI infrastructure deals worth billions of dollars. Goldman Sachs' financing business revenue is rapidly growing, with its FICC financing business reporting quarterly revenue exceeding $1 billion this year, a significant increase from $651 million in the first quarter of 2023.

Goldman Sachs' move aims for dual objectives: on one hand, to increase loan business revenue, and on the other hand, to create more investment tools for asset management and wealth management clients. The company plans to retain some of the debt on its balance sheet while selling the remainder to insurance companies and the broader securitization market.

New Team Focuses on AI Infrastructure Financing

The newly formed infrastructure and physical asset financing team will make AI-related infrastructure its core business direction.

According to media reports citing informed sources, the main driving force behind this initiative is a new round of billion-dollar deals involving AI data center financing, including the substantial power facilities required for data center operations and the financing of processor equipment behind AI construction.

Reports indicate that the team's business scope is not limited to the AI sector. In both developed and emerging markets, traditional infrastructure construction or upgrade projects will also be included, covering various projects from toll roads to airports.

Additionally, financing arrangements for renewable energy, which is in growing global demand, and certain types of liquefied natural gas production, as well as military and other equipment financing related to rising defense spending in multiple countries, will fall under the management of the new team.

Financing business is increasingly becoming an important driver of profit growth for Goldman Sachs. The company reports most of its loan arrangement income through its so-called FICC financing business, which has surpassed $1 billion in quarterly revenue this year, achieving significant growth compared to $651 million in the first quarter of 2023.

Earlier this year, Goldman Sachs established the Capital Solutions Group, which focuses on finding or facilitating financing deals. This organizational restructuring is taking place within the framework of that group, reflecting the trend observed by Goldman Sachs bankers of a surge in government and corporate borrowing demand.

Furthermore, according to a memorandum seen by the media, in addition to the infrastructure financing team, Goldman Sachs also announced the establishment of three other teams. Almost all of these adjustments are related to the surge in government and corporate borrowing demand.

Goldman Sachs is integrating teams that previously focused on providing financing to mortgage and other consumer loan issuing institutions. This team will also provide financing services to private equity firms acquiring consumer loan balances.

Additionally, a private equity and alternative capital markets team will focus on arranging private loans for companies seeking debt financing as an alternative to public bond issuance. The Capital Solutions Group will also include the company's existing commercial real estate financing team

Dual Strategic Goals

According to media reports citing informed sources, Goldman Sachs' goal is not only to increase loan business revenue but also to create more investment tools for its asset management and wealth management clients.

This strategy allows Goldman Sachs to play multiple roles in the financing market: both as a lender and as a debt distribution channel.

Goldman Sachs plans to continue retaining part of the debt on its own balance sheet while selling other portions to insurance companies and the broader securitization market.

This model not only brings direct loan income to the company but also generates fee income through debt sales, while providing institutional investors with opportunities to participate in the infrastructure and AI construction boom