The AI Trade Runs on Borrowed Money as Lenders Reprice Risk
The AI trade now runs on borrowed money, and the lenders are repricing it
AI capital spending is increasingly funded by debt as major tech firms like Amazon, Google, and Microsoft face rising borrowing costs. While the market continues to absorb record issuance, investor demand is weakening, forcing companies to offer higher yields. This trend signals a costly credit expansion rather than an immediate contraction, yet the thinning equity risk premium suggests growing tension between expensive valuations and the mounting cost of capital.
What separates an expansion from a contraction is not the level of spreads but whether new issuance keeps clearing.