(Bloomberg) — Borrowing tied to the AI data-center boom is quickly climbing Wall Street’s list of potential credit threats, as investors increasingly worry that the breakneck pace of financing could sow the seeds of the next market shock.
Roughly 34% of global fund managers surveyed by Bank of America Corp. earlier this month said AI hyperscaler capital spending was the most likely source of a future systemic credit event, double the share from April. US private credit remains the top concern for 42% of respondents, all be it down from 57% last month.
The results highlight a rapid shift in what investors see as the market’s biggest credit threat. Tech companies have borrowed more than $300 billion from US investors to fund AI spending since the beginning of last year, with bankers predicting billions more to come in the months ahead. The concern is that firms are loading up on unprecedented amounts of debt to fund AI buildouts in which payoffs remain uncertain.
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“It has really become exponential in terms of the volume we’re seeing,” JPMorgan Chase & Co. managing director of leveraged finance David De Boltz said Tuesday in a Bloomberg TV interview. “Everyone is working out where they’re going to put that cash, and how much cash do they have to hold for these deals.”
The BofA global fund manager survey polled more than 150 participants between May 8 and May 14.
US consumer credit was the top concern for 6% of respondents, while 4% listed Japanese government debt and 2% cited crypto and stablecoins as the most likely source of a credit event.
Among broader tail risks, 40% noted a resurgence of inflation as the biggest threat, while 20% cited geopolitical conflict, 18% a disorderly rise in bond yields, 11% an AI bubble and 6% private credit.
Despite the concerns over the risks tied artificial-intelligence spending, De Boltz said lenders have grown more wary of financing software companies that could be disrupted by AI, pushing more capital toward businesses tied directly to the technology instead.
“All of that cash is going into AI,” he said.
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