🧠 Food for thought

Implications, context, and why it matters.

The debt surge fueling bubble fears is already underway

• Some credit investors expect a later wave of AI-related borrowing, yet the five largest hyperscalers, large cloud computing companies such as Amazon and Meta, have already issued $121 billion this year 1.
• That total runs more than four times the group’s average annual issuance over the past five years 1.
• The rush of new bonds has weighed on performance. Oracle’s bond spreads widened by 48 basis points from Sep. 1 to Nov. 14 1.
• These companies can fund expansion with operating cash flow. They still tap debt to keep balance sheets flexible and potentially lower the cost of capital 2.

Bubble fears are creating a parallel ‘scare trade’ beyond credit markets

• A survey finds few credit investors worry that AI will make traditional companies obsolete. Even so, a parallel “scare trade” is hitting sectors seen as exposed to AI disruption 3.
• Software sits at the center of the selloff, with the sector’s most popular ETF (exchange-traded fund) sliding to its lowest level since 2023 amid displacement worries 3.
• Those fears could spread through debt markets. Many software firms viewed as at risk carry sizable borrowings from private credit lenders, non-bank firms that make loans 3.
• Concern is also moving beyond tech, as analysts flag similar disruption risk for insurance brokers and real estate services companies 3.