The AI debt binge has echoes of the financial crisis: ALEX BRUMMER

Alex Brummer argues that the surge in debt financing for artificial intelligence infrastructure bears resemblances to the pre-2008 credit build-up, with the warning centred on leverage accumulating in areas whose revenue payoffs remain uncertain. The transmission channel runs through credit spreads and funding conditions: heavy borrowing by hyperscalers and data-centre developers raises aggregate corporate debt issuance, which can tighten spreads on investment-grade and high-yield paper if investors begin demanding greater compensation for duration and concentration risk. Exposure is most pronounced in corporate bonds of capital-intensive technology issuers, private credit vehicles financing data-centre projects, and semiconductor and cloud-infrastructure equities whose valuations depend on sustained capital expenditure. Traders should watch the next US high-yield issuance data and quarterly capex guidance from major cloud providers, since any pullback in spending commitments would test whether the debt is being serviced by realised cash flows rather than expected future demand.

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