Is the AI boom starting to unravel? While investors remain focused on soaring AI valuations and the likes of Nvidia, Microsoft and Meta, the credit markets are sending a very different warning signal.
In this episode, Anthony Cheung and Piers Curran explore the growing risks behind the AI investment boom, with AI-linked corporate debt issuance reaching $466 billion and trading volumes in credit default swaps (CDS) surging to more than $9 billion a week. We explain how CDS markets work, why borrowing costs are rising and what bond traders might be seeing that stock market investors are missing.
We take a closer look at CoreWeave, one of the biggest players in AI cloud infrastructure, where soaring debt costs have raised questions about the sustainability of its business model. Could rising borrowing costs trigger a wider crisis across the AI ecosystem, even as demand for computing power continues to accelerate?
Finally, we examine whether today's AI boom is following the same path as the dot-com bubble, why upcoming earnings from the technology giants could prove critical and what investors should watch for as the AI investment cycle enters its next phase.
00:00 Is the AI Bubble About to Burst?
01:23 Why AI Debt Is Raising Alarm Bells
04:11 The $466 Billion AI Debt Boom
06:54 Credit Default Swaps Explained
11:57 How Traders Hedge Against AI Risk
15:11 The AI Risk Pyramid
16:44 Big Tech's Growing Debt Problem
21:32 Why CoreWeave Is Under Pressure
25:07 How CoreWeave's Business Model Works
29:13 Could Rising Debt Costs Trigger a Crisis?
31:22 Is This Another Dot-Com Bubble?
36:07 What Happens Next for the AI Boom?