Credit Markets Blink Red as AI Debt Doubts Go Global
Corporate bond yield premiums worldwide have surged to their widest since May 2025, touching up to 129 basis points on a Bloomberg index. The move marks a 17-month high and, according to Bloomberg, the strongest risk-off signal from bond markets in more than a year, as an AI stock selloff and rising geopolitical tensions pushed investors toward safe-haven assets.
The stress is synchronized. On Friday, spreads on dollar bonds of higher-rated Asian companies widened to their highest since July 2025, moving in tandem with credit markets broadly. Asia is not decoupling from the repricing; it is confirming that the fear is global rather than regional.
At the center is doubt over debt-fueled AI buildouts delivering profits soon enough. BeInCrypto, citing Bloomberg analysis, notes that accelerating AI-related debt issuance competes for capital, lifting yields and widening spreads, which in turn raises refinancing costs for the very companies building AI infrastructure. The loop is self-reinforcing: wider spreads make the AI bet more expensive to fund.
Wall Street titans are openly split. Citadel's Ken Griffin warned the industry was "almost certainly" headed into bubble territory. Blackstone President Jon Gray rebutted the claim after third-quarter results, saying demand is "almost parabolic" and that AI differs sharply from the 1990s telecom bubble: companies are building capacity while struggling to keep up with demand, not building on hope. He cited Ode, an AI consultancy formed with Anthropic, as overwhelmed by client demand, and Blackstone's roughly $200 billion data-center empire as its biggest career bet.
The equity selloff has a mirror image in government bonds. Treasuries posted their best day in more than a year on Thursday, with short-dated yields falling as much as 20 basis points and the ten-year dropping 17 basis points through the 5% level to near 4.97% in Asian trading, the largest one-day decline since August 2024. The swing is sharp: the ten-year had briefly traded above 5.3% days earlier on hot inflation data.
The pain is tiered. Companies borrowing heavily to buy chips and build data centers suffered most. Quartz, citing Reuters, reports CoreWeave shares fell about 15% in the week, its unsecured bonds yielding around 15% while its credit default swaps topped 600 basis points and moved above 1,000 the next day; its second-quarter report showed a debt-to-equity ratio of 8.94 with quarterly interest expense up to $640 million from $267 million. Oracle fell about 10% with CDS near 203 basis points, an 18-year high. State Street data show Galaxy Helios widening 119 basis points to 736, Core Scientific 105, developer Edged 94, and CoreWeave 86 to 934. The Nasdaq-100 fell 2.5% on October 16 and 5.5% on the week; the Philadelphia Semiconductor index slumped about 12% in October though still up 57% for the year. ASML fell about 4% despite raising its full-year outlook for the third time, TSMC slid despite record revenue, and Barclays downgraded Dell.
Primary markets are tightening. Third-quarter Asian dollar bond sales slumped 10% to about $88 billion, with no syndicated issuance in the first days of October as yields hit two-year highs. In September, foreigners sold a net $8.21 billion of bonds across India, Indonesia, Malaysia, South Korea and Thailand, the heaviest monthly outflow since the $17.28 billion sold in March 2020, according to regulator and bond-body data cited by Reuters. More than $1 trillion was erased from 20 of the world's largest AI and semiconductor stocks in mid-October.
What comes next turns on three variables: whether hyperscaler earnings show AI capex converting into revenue growth, whether inflation and Federal Reserve tightening expectations keep long yields elevated, and whether the failed multibillion-dollar listing of Australian data-center firm Firmus, flagged by The Guardian, proves an isolated miss or an early sign that capacity-first bets face funding limits.