Extreme demand for AI infrastructure is pushing investors to treat tech giants like Google as ultra-stable, long-term investments, similar to government bonds or utilities. The creation of a "Century Bond" shows investors are willing to accept very long-term horizons, framing AI as foundational, generational infrastructure.

The host challenges the standard definition of the term premium, questioning why investors should receive "extra" compensation for holding longer-term bonds. The framing should be about receiving "appropriate" compensation for risk, just like any other asset class, which reframes the entire concept.

This concept quantifies a reasonable time horizon for any asset, including stocks, by measuring its sequence of returns risk. It allows financial planners to build institutional-style, liability-driven portfolios for individuals by matching assets to specific future goals.

Tech giants are issuing massive amounts of highly-rated debt at a discount to fund AI expansion. This makes existing, lower-rated corporate bonds from other sectors look less attractive by comparison, forcing a repricing of risk and higher borrowing costs across the credit spectrum.

With credit curves already steep and the U.S. Treasury curve expected to steepen further, the optimal risk-reward in corporate bonds lies in the 5 to 10-year maturity range. This specific positioning in both U.S. and European markets is key to capturing value from 'carry and roll down' dynamics.

Despite forecasting a massive surge in bond issuance to fund AI and M&A, Morgan Stanley expects credit spreads to widen only modestly. This is because high-quality, highly-rated companies will lead the issuance, and continued demand from yield-focused buyers should help anchor spreads.

Unlike the dot-com bubble's weak issuers, the current AI debt boom is driven by investment-grade giants. However, the risk is that these stable companies are using debt to finance speculative, 'equity-like' technology ventures, a concerning trend for credit investors.

The bond market is unconcerned by massive AI capital expenditure from tech giants, viewing them as high-quality credits with immense capacity for debt. In contrast, the equity market is highly volatile, punishing even minor deviations from expected growth, highlighting a fundamental difference in risk assessment between debt and equity investors.

Massive government issuance is crowding out private credit and making sovereign bonds inherently riskier. This dynamic is collapsing credit spreads and could lead to a market where high-quality corporate bonds are perceived as safer than government debt, challenging the concept of a 'risk-free' asset.