Major tech companies are investing in their own customers, creating a self-reinforcing loop of capital that inflates demand and valuations. This dangerous practice mirrors the vendor financing tactics of the dot-com era (e.g., Nortel), which led to a systemic collapse when external capital eventually dried up.

Large banks have offloaded riskier loans to private credit, which is now more accessible to retail investors. According to Crossmark's Victoria Fernandez, this concentration of risk in a less transparent market, where "cockroaches" may be hiding, is a primary systemic concern.

Unlike prior tech revolutions funded mainly by equity, the AI infrastructure build-out is increasingly reliant on debt. This blurs the line between speculative growth capital (equity) and financing for predictable cash flows (debt), magnifying potential losses and increasing systemic failure risk if the AI boom falters.

Venture-backed private companies represent a massive, $5 trillion market cap, exceeding half the value of the 'Magnificent Seven' public tech stocks. This scale signifies that private markets are now a mature, institutional asset class, not a small corner of finance.

Today's market is more fragile than during the dot-com bubble because value is even more concentrated in a few tech giants. Ten companies now represent 40% of the S&P 500. This hyper-concentration means the failure of a single company or trend (like AI) doesn't just impact a sector; it threatens the entire global economy, removing all robustness from the system.

A new risk is entering the AI capital stack: leverage. Entities are being created with high-debt financing (80% debt, 20% equity), creating 'leverage upon leverage.' This structure, combined with circular investments between major players, echoes the telecom bust of the late 90s and requires close monitoring.

A consistent 2-5% of Europe's public high-yield market restructures annually. The conspicuous absence of a parallel event in private markets, which often finance similar companies, suggests that opacity and mark-to-model valuations may be concealing significant, unacknowledged credit risk in private portfolios.

Private credit funds have taken massive market share by heavily lending to SaaS companies. This concentration, often 30-40% of public BDC portfolios, now poses a significant, underappreciated risk as AI threatens to disintermediate the cash flows of these legacy software businesses.

The global economy's reliance on a few dominant tech companies creates systemic risk. Unlike a robust, diversified economy, a downturn in a single key player like NVIDIA could trigger a disproportionately severe global recession, described as 'stage four walking pneumonia.' This concentration makes the entire system fragile.