Who’s Financing the AI Boom? (With Bryan Whalen)

The recent Consumer Price Index report revealed core inflation running hotter than expected, fueling market volatility and recalibrating Federal Reserve rate hike expectations. This inflationary pressure coincides with an unprecedented capital spending boom driven by AI data center construction, where hyperscalers like Microsoft and Amazon are issuing record amounts of debt. While these tech giants maintain robust balance sheets, the broader AI ecosystem—particularly structured project bonds and smaller, non-AI businesses—faces heightened vulnerability to shifting capital costs and potential adoption hurdles. Investors are currently not being adequately compensated for these risks in the corporate bond market. Consequently, defensive positioning in fixed income, specifically favoring agency mortgage-backed securities and shorter-duration treasuries, offers a more prudent approach than chasing yield in the AI-concentrated corporate sector.