AI becoming a credit story
Manias become more susceptible to systemic risk when they move from the equity to credit side of the ledger. As the AI capex buildout continues, the stakes become much higher for the capital deployed to generate sufficient value.
The view
Mega-cap tech companies were once viewed as rock-solid credits given their minuscule capital demands and abundant free cash flows. Everything has changed in the past 12 months as tech-related AI-tagged debt is now making up roughly 15% of the US investment grade market.
In H1 2026 Amazon, Alphabet, Meta and Oracle issued $195 billion of debt and increasingly hyperscalers are issuing EUR, GBP and CHF paper to find more liquidity.
Technical supply pressure has forced hyperscaler bond spreads higher as jumbo issuances continue to surprise the market and reprice existing paper wider leading Oracle’s CDS to hit a 7-year high. Additionally, demand fatigue is rapidly setting in as average book-building cover ratios fall from 5x in February to below 2x presently.
Disclaimer: This material has been prepared by MASTERPIECE ADVISORS for informational purposes only and should not be construed as financial advice. Investments in hedge funds are speculative and involve a high degree of risk. This material is confidential and may not be disclosed without the express written approval of MASTERPIECE ADVISORS.
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