Galaxy Digital (NASDAQ:GLXY) CEO Mike Novogratz believes credit markets are approaching peak anxiety as rising interest rates, geopolitical tensions and the enormous cost of artificial intelligence infrastructure put pressure on borrowers.
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Speaking during the company’s third-quarter earnings call Tuesday, Novogratz said credit markets have experienced significant stress in recent weeks, even as equity markets have suffered comparatively smaller declines.
"You’d have to be living under a rock if you didn’t realize there was stress in the credit markets recently," Novogratz said, pointing to oil prices above $100 a barrel amid the war in Iran, rising Treasury yields and the scale of spending required to build AI infrastructure.
Novogratz described the market as experiencing "indigestion" and said there was no easy path toward a resolution. However, he expressed confidence that conditions would eventually improve, particularly if oil prices retreat.
AI Spending Puts Pressure On Credit Markets
Novogratz argued that investors are adjusting to a higher interest-rate environment after years of unusually cheap borrowing.
He expects short-term interest rates to remain around 4% to 5%, potentially reaching 6%, while the yield curve becomes steeper. That shift could increase financing costs for companies already facing substantial capital requirements.
The AI infrastructure boom adds another layer of pressure, with technology companies racing to secure computing capacity, power and data center infrastructure.
However, Novogratz said the recent wave of large equity raises by major technology companies could help ease pressure on credit markets by reducing their reliance on borrowing.
"Every time I see giant equity raises, I breathe a sigh of relief for the credit market," he said.
He pointed to Meta Platforms’ large equity financing and a potential additional $100 billion raise by Anthropic as examples of companies turning to equity markets to fund their ambitions.
"More equity, less credit is one way to think about it," Novogratz said.
While issuing shares can dilute existing shareholders, he argued that raising equity rather than debt could help relieve pressure on lenders and borrowers alike.
Galaxy Can Afford To Wait
Novogratz said Galaxy has the flexibility to delay tapping credit markets until the first or second quarter of 2027, giving the company time to assess financing conditions.
Galaxy is expanding its AI data center business, including its Helios campus in Texas. The company expects its second phase to come online in 2028 and is evaluating financing options for future development.
Novogratz also argued that a potential decline in oil prices could provide meaningful relief to fixed-income markets. If oil falls from around $100 to $60 a barrel, he said, pressure on yields and credit markets could ease substantially.
Despite near-term uncertainty, Novogratz remains bullish on AI’s long-term economic potential, arguing that productivity gains could help address America’s $41 trillion debt burden through stronger growth and lower inflation.
"This is the transformative technology that is literally going to change the world," he said.
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