Could the AI Debt Problem Create the Next Financial Crisis? | The Spillover

The AI-driven investment boom is creating significant volatility in the U.S. bond market, fueled by massive corporate debt issuance to fund data center infrastructure. Treasury Secretary Scott Besant’s attempt to manage rising long-term yields through buybacks faces skepticism, as fiscal deficits and policy uncertainty remain the primary drivers of market stress. Apollo Chief Economist Torsten Slok highlights that while the current financial system possesses lower leverage than in 2008, the rapid speed of data center deployment relative to GDP creates systemic risks. The reliance on AI as a singular factor across equities, fixed income, and venture capital leaves investors vulnerable to contagion if adoption slows or underwriting standards fail. Diversification into non-AI-correlated assets, such as European credit or sports financing, remains a critical challenge for investors navigating this highly interconnected and opaque financial environment.