Circular Financing and Customer Concentration: Hidden Risk in the AI Supply Chain
The data center buildout is generating unprecedented levels of orders from equipment, power, and materials suppliers. It is also concentrating receivables risk in ways that are easy to miss while volume is climbing.
The spending is real. That does not make it safe.
On June 28, 2026, the Bank for International Settlements used its flagship Annual Economic Report to name the financing behind the data center buildout as one of four pressure points facing the global economy. The figure at the center of that warning is large. The five largest hyperscalers are set to spend more than $1 trillion dollars on related capital expenditure across 2025 and 2026 combined, a pace that now exceeds their earnings and free cash flow and has led some to issue debt to close the gap.
For a finance team at a manufacturer, distributor, or contractor that sells into this buildout, the useful question is not whether the technology pays off. It is how will this rapid growth, heavy capital spending, and increasingly complex financing, change the credit profile of the customers placing the orders. Further, demand can be durable and a specific receivable can still go bad.
The demand moves straight through the supply chain
The orders are physical before they are anything else. United States power transformer demand has risen 119% since 2019, according to Wood Mackenzie, and lead times for large units have stretched to as long as four years, according to analysts at PwC. Bloomberg reported in April 2026 that more than half of the US data centers planned for the year are expected to be delayed, largely because the electrical equipment and grid connections they rely on are not available on schedule.
Thais backup reaches companies that supply transformers, switchgear, generators, cooling systems, copper and electrical steel, structural materials, fabricated components, and the logistics and construction services that move and assemble all of it. Many of these suppliers are taking orders from customers they did not serve two years ago, and the same lead times and delays mean cash can sit in work in process and receivables far longer than a clean purchase order suggests.
Fast-growing demand tends to weaken credit discipline
When a category expands quickly, the commercial pressure runs toward saying yes. Sales teams want the volume, customers ask for room, and the working assumption is that growth will cover any short-term strain. The BIS described the corporate version of this directly, pointing to a competitive race for market share that may have driven overinvestment, with firms over-committing to projects whose returns remain uncertain.
The same logic applies in trade terms. A buyer that triples its volume in a year is not automatically three times as creditworthy.
Circular financing, in plain terms
Circular financing is the structure the BIS singled out. A chipmaker or hyperscaler takes an equity stake in a model developer or a specialized cloud provider, which then commits to multi-year purchases of chips or computing capacity from the same party that funded it. Money goes out as investment and returns as revenue, which can make demand look more independent and more durable than it actually is.
A related pattern keeps much of the associated debt out of view. The BIS has described data center assets developed inside joint ventures or special purpose entities, capitalized with sponsor equity and private placement debt, with the hyperscaler holding a minority stake and a long-term lease or capacity agreement. That replaces upfront capital spending with multi-year operating commitments while keeping most of the debt off the hyperscaler’s own balance sheet.
The financing has also shifted toward lenders that disclose less. Private credit funds originated more than $40 billion dollars in loans to AI-related companies in 2025, up from about $3 billion dollars in 2010, according to BIS research, and the BIS notes that terms are often poorly disclosed, with a risk that the same asset is pledged more than once. For a supplier, the practical point is that a customer’s contracted revenue may rest on commitments that can be withdrawn quickly if returns disappoint, and the balance sheet behind them can be harder to read than it looks.
You can be exposed even if your customer is not a technology company
Most suppliers in this chain do not sell to a hyperscaler. They sell to a contractor, a fabricator, an equipment integrator, or a distributor building for a data center developer or a specialized cloud operator. That intermediate customer can carry the same risks in concentrated form, with an order book that depends on one large project, one anchor customer, or one source of funding.
The concentration is not hypothetical. CoreWeave, one of the larger specialized cloud providers, drew roughly two-thirds of its 2025 revenue from a single customer, according to data compiled by Sacra. A buyer whose own revenue is that significantly concentrated is only as stable as its largest contract, and the suppliers behind it inherit that exposure regardless of whether it ever appears on their customer list.
Warning signs in an exposed receivable
A few patterns deserve a closer look before a credit line grows:
Customer concentration, where a meaningful share of sales sits with one buyer or one project.
Payment terms that are long to begin with, or that the customer is pushing to extend.
Rapid order growth from newer or thinly capitalized buyers without a record through a full cycle.
Project-based demand that depends on outside financing remaining available to finish the work.
Customers that rely on a single large customer or a single funding source.
Receivables growing faster than the quality of the customer’s revenue or its capacity to pay.
“Strategic” customers requesting unusual concessions, such as oversized limits, deferred terms, or relaxed documentation, in exchange for volume.
None of these is disqualifying on its own. Several of them together in the same account is the signal to slow down and verify.
Where trade credit insurance fits
Trade credit insurance protects a company’s receivables against customer nonpayment and insolvency. It is not a position on whether the buildout succeeds. It is a way to keep participating in the growth while limiting what any single failure can do to the balance sheet.
In practice it does several things at once. It covers a specific, sometimes large, loss when an insured customer cannot pay. It enables the credit/finance team to extend higher limits with more confidence. It tends to improve lender comfort, since insured receivables are often treated more favorably in an asset based borrowing base. And it gives credit teams access to carrier risk monitoring on their buyers, an outside, independent read on customers whose financing can change quickly.
A checklist before extending a larger line to an exposed customer
Identify the customer’s ultimate source of demand and funding, not only the entity named on the invoice.
Confirm how concentrated the customer is on its own largest customer or contract.
Review whether current orders depend on a project or financing that is not yet secured.
Compare receivables growth against revenue quality and payment history, not against order volume.
Set a credit limit that reflects the customer’s standalone strength, then decide separately whether to insure the exposure above your comfort level.
Document terms clearly, and treat any request to loosen them as part of the credit decision rather than a sales concession.
The Conclusion
This is happening while business failures are rising broadly. Commercial Chapter 11 filings increased 42% in April 2026 over the prior year, following a 37% increase in the first quarter, according to Epiq AACER data published by the American Bankruptcy Institute. Growth in a single theme does not suspend that trend; a fast-growing account often looks healthy until the moment it does not.
If demand tied to the data center buildout is changing your customer mix or your receivables exposure, Trade Credit Group can help evaluate where trade credit insurance fits.
This article is general information for business audiences and is not legal, financial, or insurance advice. Coverage terms and availability vary by insurer and by account.
Sources
Bank for International Settlements, Annual Economic Report 2026, Chapter I: Progress and peril (June 28, 2026).
Bank for International Settlements, Financing the AI boom: from cash flows to debt, BIS Bulletin No. 120 (January 7, 2026).
Bank for International Settlements, Financing the AI infrastructure boom: on- and off-balance sheet borrowing, BIS Quarterly Review (March 16, 2026).
Power Magazine, Transformers in 2026: Shortage, Scramble, or Self-Inflicted Crisis? (January 2, 2026), citing Wood Mackenzie.
pv magazine USA, U.S. transformer market faces severe supply constraints as lead times extend to four years (May 11, 2026), citing PwC.
Bloomberg, US Data Center Boom Relies on Hard-to-Find Electrical Equipment (April 1, 2026).
Epiq AACER and American Bankruptcy Institute, April Commercial Chapter 11 Bankruptcy Filings Increase 42 Percent from Previous Year (May 6, 2026).
Epiq AACER and American Bankruptcy Institute, First Quarter Subchapter V Small Business Filings Increase 67 Percent over Previous Year (April 6, 2026).