Bond markets are now funding the AI boom. History tells us that's a warning sign

The world’s biggest technology companies are burning through their once-abundant cash reserves to fund the AI arms race.

Increasingly, they’re turning to debt markets to fund the buildout.

That means the most speculative part of the market is finding its way into defensives.

So what does that mean for advisers and their clients?

Fixed Income Director at Capital Group, Haran Karunakaran, joins Ally to explain:

What previous debt-fuelled booms can teach us The warning signs emerging in credit markets Why this cycle could still play out differently

Chapters:

00:00 AI’s Debt-Fuelled Boom 03:53 Lessons From Past Bubbles 05:57 Cracks in Credit Markets 09:12 Is Credit an AI Hedge? 12:08 How Credit Investors Analyse AI 13:46 What Separates Hyperscalers 17:29 Are AI Bonds Attractive? 20:09 Beyond the AI Trade 22:52 Credit’s Biggest Risks 25:50 Where Credit Looks Attractive 28:18 Rethinking Defensive Allocations

📈 Stocks and ETFs Mentioned: Microsoft (NASDAQ: MSFT), Oracle (NYSE: ORCL), Meta Platforms (NASDAQ: META)

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CPD Points: This episode is accredited for the following CPD points by the Financial Advice Association of Australia (FAAA). Complete the quiz here to claim your points.

0.5 Total Hours

Knowledge Requirements: Fixed Interest (0.25 hour), Managed Investments (0.25 hour)

Legislated CPD Area: Technical Competence (0.50 hour)

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This episode has been sponsored by Capital Group. To find out more about Capital Group and their funds, head to their website: https://www.capitalgroup.com/intermediaries/au/en/

Thanks to Capital Group for supporting this episode of Basis Points and helping to keep our content free.

Disclaimer: Past results are not a guarantee of future results. This information has been provided solely for informational purposes and is not an offer, or solicitation of an offer, or a recommendation to buy or sell any security or instrument listed herein. Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. The information provided is not intended to be comprehensive or to provide advice.

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