Federal Reserve urged to tread carefully as AI debt piles up, Bloomberg Opinion argues
A column says CoreWeave's bond rout shows credit markets are already pricing AI risk, as the IMF notes hyperscalers now make up 10% of investment-grade issuance
The Federal Reserve should proceed carefully as bond investors reprice the risks of debt-funded AI spending, so that a market correction does not turn into a self-reinforcing downturn, a Bloomberg Opinion column published October 20 argued.
The column, which reflects the views of its author, pointed to the recent selloff in CoreWeave’s debt as evidence that credit markets are already pricing in the risks of the AI buildout. CoreWeave’s five-year credit default swap spread hit a record on October 15, and some of its bonds have entered distressed territory.
IMF flags hyperscaler share of bond market
The argument echoes warnings in the International Monetary Fund’s latest Global Financial Stability Report, released last week, which found that hyperscalers now account for 10% of global investment-grade bond issuance, up from less than 1% in 2024, Hedgeweek reported, citing Reuters.
The IMF warned that an AI market correction could reduce wealth and real-economy investment and spill over into global markets, and suggested AI may require less capital and deliver smaller economic benefits than expected. It urged policymakers to curb excessive leverage in AI-related investments, including exposure through derivatives and margin loans.
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Investor hedging against Big Tech’s borrowing has also surged, with weekly credit default swap trading on major technology issuers topping $9 billion in September, according to Morgan Stanley data.
Disclosure: This article was edited by Diego Almada Lopez. For more information on how we create and review content, see our Editorial Policy.
