As Wall Street funds the massive data centers and chip infrastructure that support the AI boom, a new kind of anxiety is spreading: early signs suggest that the credit market's ability to further absorb debt is nearing its limit. The yield on bonds and loans that finance AI infrastructure construction has surged to double digits one after another. Bankers are finding it increasingly difficult to transfer risk to insurance companies and other investors. Elon Musk even warned a few days ago that hundreds of so-called “new cloud” companies are at risk of going out of business as it becomes difficult for companies to obtain new financing. As this unease intensifies and further raises concerns about potential economic impacts, Castle Securities reminds customers that even tech giants may get involved because they are supporting a number of projects critical to achieving AI ambitions with their balance sheets. This risk is increasingly evident in the credit default swap market, where banks and other lenders use this market to hedge their risk exposure. In recent days, many companies, from Broadcom to SpaceX and Oracle, have seen a sharp rise in the cost of debt default insurance, reaching a level more common among junk-level borrowers. The impact has also begun to spread to the wider credit market.

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