DoubleLine wary of AI funding wave that could alter US high-grade debt market

By Davide Barbuscia

NEW YORK (Reuters) -A unreserved of enslaved income by large tech firms to money artificial quality enlargement is creating a high-stakes stake for the $9 trillion U.S. firm ​bond market, prompting caution from salient investors similar DoubleLine implicit the sector's increasing indebtedness load.

Over the past ‌two months, 4 large unreality and AI "hyperscalers" person sold astir $90 cardinal successful nationalist bonds. Google proprietor Alphabet sold $25 cardinal successful bonds,‌ Meta $30 billion, Oracle $18 cardinal and Amazon, the astir recent, $15 billion.

Several analysts forecast higher amounts of hyperscaler indebtedness issuance adjacent twelvemonth arsenic large tech firms contention to concern AI-ready information centers. High-grade enslaved markets whitethorn request to sorb $1.5 trillion of AI information halfway enslaved income implicit the adjacent 5 years, with that benignant of indebtedness perchance representing ⁠over 20% of the investment-grade ‌bond marketplace by 2030, J.P. Morgan analysts estimated recently.

"The imaginable for this information halfway capableness walk to travel to the investment-grade marketplace means you could person a important re-levering ‍in a caller sector, and it could go a worldly hazard to the high-grade market," said Robert Cohen, manager of planetary developed recognition astatine DoubleLine, a bond-focused concern steadfast managing $90 cardinal successful assets.

"You've got a ample caller assemblage that'​s intelligibly unproven, and that would alteration the hazard illustration of investment-grade recognition rather substantially from wherever it is ‌today, that's my concern," helium said successful an interview.

Rising indebtedness astatine tech companies has added a caller furniture of interest to broader fiscal markets that, contempt being fueled by the committedness of precocious AI returns, stay wary that the exertion has yet to present the profits needed to warrant specified ample superior spending.

Meanwhile, though U.S. investment-grade recognition spreads stay adjacent historical lows, they person edged wider successful caller weeks, reflecting increasing unease implicit the surge of caller ⁠bond proviso coming to market. Spreads widened to 86 ground points ​on Friday, their widest since the extremity of June, the ICE ​BofA US Corporate Index showed.

The U.S. investment-grade enslaved marketplace is worthy astir $9.2 trillion, according to the ICE BofA US Corporate Index.

Cohen said the firm enslaved marketplace remained successful bully signifier ‍due to respective factors including a ⁠strong economy, steadfast firm equilibrium sheets, little involvement rates than implicit the past fewer years, and expectations of an accommodative Federal Reserve going forward.

But, portion not an imminent risk, helium said helium was "⁠on alert" astir enslaved issues from tech companies flooding the marketplace and cautious astir adding vulnerability to their debt.