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.

Credit investors should look beyond direct AI companies. According to Victoria Fernandez, the massive infrastructure build-out for AI creates a significant tailwind for power and energy companies, offering a less crowded investment thesis with potentially wider spreads and strong fundamentals.

For the first time in years, leading-edge tech is incredibly expensive. This requires structured finance and massive capital, bringing Wall Street back to the table after being sidelined by cash-rich tech giants. The chaos and expense of AI create a new, lucrative playground for financiers.

The massive capital rush into AI infrastructure mirrors past tech cycles where excess capacity was built, leading to unprofitable projects. While large tech firms can absorb losses, the standalone projects and their supplier ecosystems (power, materials) are at risk if anticipated demand doesn't materialize.

The modern high-yield market is structurally different from its past. It's now composed of higher-quality issuers and has a shorter duration profile. While this limits potential upside returns compared to historical cycles, it also provides a cushion, capping the potential downside risk for investors.

A significant shift in corporate finance strategy has occurred: companies no longer universally strive for an investment-grade (IG) rating. Many firms, including 'fallen angels' downgraded from IG, are content to operate with a high-yield rating, finding the higher borrowing costs acceptable for their business models.

Despite higher spreads in the loan market, high-yield bonds are currently seen as a more stable investment. Leveraged loans face risks from LME activity, higher defaults, and investor outflows as the Fed cuts rates (reducing their floating-rate appeal). Fixed-rate high-yield bonds are more insulated from these specific pressures.

Barclays forecasts a 40% jump in net investment-grade debt supply in 2026, driven by tech sector CapEx and renewed M&A activity. This massive influx of new bonds will test market demand and could lead to wider credit spreads, even if economic fundamentals remain stable.

The AI infrastructure boom is a potential house of cards. A single dollar of end-user revenue paid to a company like OpenAI can become $8 of "seeming revenue" as it cascades through the value chain to Microsoft, CoreWeave, and NVIDIA, supporting an unsustainable $100 of equity market value.