Jackie Bove: The amount of capital required for these builds has also continued to result in really an expanded and broad spectrum of lenders and investors, not just the commercial banks, not just your traditional commercial banks, so. We’re also seeing private credit enter the market. We’re seeing some of these deals get rated so they can have some of some more of the institutional players come in. So really looking at starting to really expand the sources of financing there as well.
Jeff Johnston: That was Jackie Bove, senior vice president, digital infrastructure for CoBank, regarding the expanded scope of commercial banks and institutional investors who are financing U.S. digital infrastructure projects.
Hi, I’m Jeff Johnston and welcome to the All Day Digital podcast where we talk to industry executives and thought leaders to get their perspective on a wide range of factors shaping the digital infrastructure market. This podcast is brought to you by CoBank’s Knowledge Exchange group.
Today we’re going to cover the fast-moving world of digital infrastructure financing at a moment when capital, technology, and policy are colliding in unprecedented ways. The amount of capital being spent on digital infrastructure is staggering, and with it are new financing structures that are attracting capital across the institutional investor base. Jackie and her team are dealing with this every day, so I was excited when she agreed to come on the podcast to discuss what’s really happening in the market.
So, without any further ado, pitter patter, let’s see what Jackie has to say.
Johnston: Jackie, welcome to the podcast. It’s an absolute pleasure to have you on today. Thanks for the time. How have you been?
Bove: Thanks, Jeff. Great to be here. I’ve been doing well, keeping busy.
Johnston: Yeah, I’m sure you have been. I’m sure you have been busy. Yeah, a lot, a lot going on in the digital infrastructure space for sure. Which is why I’m so excited to have you on because I know you’re obviously deeply involved in a lot of financing the digital infrastructure market from various aspects.
So maybe Jackie and I just sort of the set the stage for listeners, maybe you could just kind of give us a very high-level overview of the digital infrastructure market and where do you see things going over the next year or so?
Bove: Sure, sure. It’s a great question. So I see the overall health of the digital infrastructure market is quite strong. You know, we’re continuing to see M& A activity picking up. It was slower this year than we expected in the digital infrastructure space, but we’re seeing it starting to pick up, seeing multiples rebounding a bit as well. But of course there’s continued very strong growth in the data center space. We have regional and rural carriers that are still expanding their networks both to reach their most distant customers and also to look at competitive opportunities in more fiber deprived areas. I also wanted to note that in 2026, as you know, BEAD funding is expected to start flowing. So that’s a bit over $42 billion of alternative funding that will come into the market in 2026.
Johnston: That’s great. So, how do you see BEAD impacting the overall borrowing space? I mean is that a, is that a good thing for commercial banks if you will, are there opportunities for them to participate in that program, do you think it’s gonna really kind of accelerate overall fiber builds? I’m just curious how you kind of think about that.
Bove: I think it really depends. I think it could kind of go either way. There can be some opportunities of course to issue letters of credit which are required in the BEAD program. There could be some opportunities to pre-fund some of those investments. So those could be some opportunities for commercial banks. I think we’re seeing more of the dollars go to fiber, although we are seeing some more as you know LEO and fixed wireless players will be you know receiving some of those funds as well. And there’s some opportunities to work with some of the fixed wireless players as well.
Johnston: Well, it’s great that this program is finally going. I know it’s been kind of stuck in limbo for a while. So it feels like we’re getting this thing in gear. So that’ll be exciting for those in rural America who don’t have access to a reliable broadband. So that that’s wonderful.
If you think about the industry from a risk perspective, you know in terms of how banks and borrowers are thinking about risk just in general and this could be you know fiber I guess or data centers, I mean you know take it any which way you’d like I guess Jackie, but are you seeing any sort of changes to risk appetite? Is it more risk on or kind of more risk off right now?
Bove: Sure. I think it’s, I’d say probably more risk on. We’re seeing an increase in risk tolerance among our borrowers and the banks. For example, we’ve seen an increase in the loan-to-cost fiber to the home financings within the U.S., and that’s been over the last couple of years. You know, that’s still really skewed to a select group of U.S. lenders and certain European lenders who are really more familiar with that business model.
But it definitely speaks to the willingness to lean on these, you know, different kind of business models. And I’d say I’d look at that as a little more kind of risk on. And then we also see the ABS market has really taken a hold in the digital infrastructure space. We’re of course seeing those transactions to take out construction financing in the data center space, but also we’re seeing more fiber to the home customers accessing those markets. And that’s relatively new for them.
Johnston: So actually just to clarify, so I’ve got it straight, the loan to cost market—that’s really more of kind of like a project finance situation, right? Where I think normally banks lend based on cash flow generation and assess risk that way, but is loan-to-cost more about asset value and lending money based on asset value and not so much cash flows which will hopefully come? Is that is that the right way to think about it?
Bove: That is correct, yes. We’re looking at a little more kind of construction-type financing.
Johnston: That’s good. You mentioned a certain amount of borrowers, would that, is that sort of structure applicable or could it be applicable across a very wide range of borrowers? Or is that really only a certain select type of borrower that banks have confidence in doing, in entering that structure given the increased risk?
Bove: I think really they have to be borrowers where they have equity backing them, right. So we’re seeing that more from some of the infrastructure funds and the and the private equity sponsors there because for example, if they’re not meeting the requirements to get additional debt, equity needs to kick in. So it doesn’t work for some of our more rural broadband providers that don’t have, you know, a big kind of equity backing them for these more greenfield type projects.
Johnston: Yeah, that that that makes sense. And then you also mentioned Jackie, the asset-backed structures where you know these are again I want to make sure I got this right, but these are companies who have existing operations that are generating cash flow from those from those networks and they’re looking at I guess what sort of leveraging that asset, using that asset to borrow more money, right? I mean, kind of.
Bove: Yep. That’s right. And at a lower cost of capital actually as well.
Johnston: And is this about just speed, right? Just folks are just trying to build fiber as fast as possible.
Bove: On the ABS transactions, you’re looking at more of the mature markets there, but the loan-to-cost model is really helping some of these companies in terms of speed to market and build out their fiber, that’s correct.
Johnston: Great, great. OK, excellent, excellent. Well, hey, I can’t have you on and not talk about data centers and AI. A lot of opinions on where we are and where we’re headed and obviously the amount of money that’s being thrown at this market. Oh my goodness, it’s just, it’s it truly is unprecedented and kind of mind blowing right now. So I don’t know how do you look at this market? I mean we could go, we go a lot of different directions, but how’s it kind of reshaping things or how is it impacting the market overall? I mean take again take that any way you want and I’m sure I’ll have some follow up questions.
Bove: We could talk about this for a while, but uh, you know, the size of the data center deals are really, truly unprecedented, right? We expect massive data center investment and construction to continue into, you know, 2026, 2027.
Just in the second half of 2025, there was close to $40 billion and cost of close to $20 billion financings that both entered the market around the September timeframe, you know. Unprecedented size for bank financing. These were bank financed, construction finance, so very large syndications that hit the market at the same time and we expect that to continue. So we’ve seen more of these club-type transactions in the financing space kind of $500 million, $750 million, a billion dollars. Now we kind of look at those as you know, smaller transactions these days.
So I think again the amount of capital required for these builds has also continued to result in really an expanded and broad spectrum of lenders and investors, not just the commercial banks, not just your traditional commercial banks.
We’re also seeing private credit enter the market. We’re seeing some of these deals get rated so they can have some of some more of the institutional players come in. So really looking at starting to really expand the sources of financing there as well.
Johnston: So it it just seems like whether you’re a, I don’t know, a pension fund or a commercial bank or a hedge fund or an infrastructure fund, this institutional investor base just have a real appetite to get exposure to this market. Is that is that a fair way to characterize it? And I would assume then it’s probably pretty competitive market too?
Bove: Yeah, it is a competitive market. Yeah, I think that’s right. We’re seeing some more of the pensions, pension funds interested in the deal, some of the large sovereign wealth funds. I think they’re looking at these as, you know, long-term stable and mission-critical assets and you know, looking at the stable nature of these cash flows as well if you’re looking at you know, considering the strength of the tenants in these data centers.
Johnston: Yeah, that’s an important point, I think, because these really are long life assets, right? I mean, I don’t think Amazon or Google or whoever’s building these things plans on picking up their marbles and going to another market after 10 years, right? I mean, they really view this as a, I don’t know, 30, 40, I don’t know, who knows, a long life, a very, very long life.
Bove: Right. Right. I mean, once you have the power, once you have the land, once you have the fiber connectivity, the permitting, it’s hard to pick up and leave.
Johnston: So as you think about 2026 over 2025, is it fair to, is it fair to to say at this point, of course everything’s subject to change, but at this point the financing environment for data centers, AI data centers will grow in 26 over 25? Is that is that a fair bet to make?
Bove: I think that’s a fair bet to make. Just if you just look at commercial banks over the last couple of years, we’ve seen them coming from across the globe really working on white papers to get into the space. I mean some of the syndications, are going out to call 100, 120 retail banks to fill out some of these syndications, if not more. You’re expanding into the private placement market, right you’re getting private credit in there. So yes, I think we’ll see this continue to expand.
Johnston: And then do you have any opinions at all on, I think the recent deal Meta did, there was some off balance sheet, special purpose entity type of structure in place, where it I guess it ultimately doesn’t make their balance sheet look as leveraged because some of this off balance sheet stuff. Do you have any opinion on that? I mean in terms of I guess more specifically in terms of how do, how do investors look at their risk profile of these types of transactions given some of this off balance sheet stuff that does it, is it cause for concern at all or pause or not really?
Bove: I think it depends on who you’re talking about, which tenants you’re talking about, right. I think we don’t have as much concern about the large hyperscalers, but we are continuing to look at that and take a closer look at that and there is some concern for pause especially depending on which companies you’re talking about, right. So we continue to look at that closely and you know our as we’re looking at our financing opportunities where we continue to be very selective and working with the developers who we’ve worked with for quite a long time and really understanding the transactions and the markets.
Johnston: Yeah. And you know, you kind of mentioned power too. I mean that that feels like that’s kind of the long pole in the tent here in a lot of cases, right, That can hold things up or make things go sideways. It’s not as if the market demand isn’t there so much. It’s just can you get everything lined up to execute according to your plan, right?
Bove: Right, right, exactly.
Johnston: Well, it’s a fascinating time. I mean, it seems like you can’t, read the Wall Street Journal or Bloomberg nowadays without somebody talking about the bubble, right? Are we in this A I bubble? And of course nobody knows, but at least it’s good to hear that , there still appears to be pretty healthy demand out there on the part of institutional investors to support this, this growth and we’ll just kind of see how things play out. But it’s a fascinating time for sure.
Bove: It is a fascinating time and I think the market players, everyone’s taking a much closer look. We’ll continue to take a closer look as well as this all plays out.
Johnston: I mean, the money is just crazy, right? I mean, I think, I think $400 billion-ish around there is going to be spent this year between the major hyperscalers. And that’s up from my numbers are like $235 billion last year.
Bove: It’s hard to get a handle on. It’s hard to get a handle on the numbers. I keep seeing, you know, the estimates increase.
Johnston: Yeah, I mean, these are like, you know, $100 billion here, $100 billion there. I mean, this is bigger than like the GDP of Portugal or Greece or I mean, these numbers are just crazy.
Bove: Yeah, I mean I think we, I think it was just since the second half of 2025 with the two large transactions I mentioned and some other what we now call smaller transactions closer to $60 billion, $65 billion dollars of construction financing and bank financing in the market, right, just really the second half of 2025.
Johnston: Wild. Yeah, it’s wild. We live in exciting times for sure. This has been great, Jackie, but before we wrap it up, I just want to give you an opportunity to share anything or any sort of parting thoughts that that we didn’t cover that you think we should touch on. So the stage is yours.
Bove: Thanks, Jeff. This has been a great, this has been a great conversation and I think we really do remain excited about the opportunities in the digital infrastructure space. That’s not to say that we, you know, we haven’t seen some stress in the market due to some higher leverage, higher interest rates, some slower build outs that were projected or lower penetration rates, things just moving a little more slowly especially in the in the fiber space. But we are still very excited about the space. We continue to be as we talked about very selective and diligent when we’re structuring our financings and we’re excited about the opportunities and investments going forward into 2026.
Johnston: Well said. It’s great to work for a bank that’s so supportive of so much that’s going on in rural America. So I know we’ll certainly play our part and you will. So thank you so much, Jackie, for your time today. This was wonderful.
Bove: Thank you, Jeff. Great to talk to you.
Johnston: A special thanks goes out to Jackie for being on the podcast today.
As I think about my conversation with Jackie, two key takeaways stand out for me. First, financing for fiber, broadband and data centers is becoming more sophisticated, with new structures and capital sources that are expanding what’s possible. Secondly, while the scale of AI and data center investment is unprecedented, lenders and investors are being increasingly selective and focusing on quality assets, experienced developers and sustainable growth.
Hey thanks for joining me today and a special thanks goes out to my CoBank associates Christina Pope and Tyler Herron because without them there wouldn’t be an All Day Digital podcast. Watch out for our next episode.
