"Earlier this month, OpenAI CEO Sam Altman said the quiet part out loud, telling reporters that he believes we're in a "phase where investors as a whole are overexcited about AI." Simmering concerns about a growing AI bubble - a word repeatedly invoked by Altman himself during the appearance - have gripped the industry, with spooked investors triggering a major tech sell-off in the wake of the CEO's remarks."
"And looming over it all is an inconvenient truth: the AI industry is putting the massive tab for all its AI infrastructure on the figurative credit card, as Bloomberg reports, incurring immense debt that's giving some experts an ominous feeling of déjà vu. "It's natural for credit investors to think back to the early 2000s when telecom companies arguably overbuilt and over borrowed and we saw some significant writedowns on those assets," Citigroup head of US investment grade credit strategy Daniel Sorid told Bloomberg."
Investors display signs of overexcitement about AI, triggering significant tech market volatility. Attempts to incorporate generative AI into businesses are failing or stalling at a high rate, with around 95 percent not progressing. The AI industry has accumulated substantial debt to finance massive data center buildouts and power-hungry models. Private credit is supplying roughly $50 billion per quarter for AI funding, outpacing public markets by two to three times. The combination of large infrastructure spending, reliance on private credit, and unclear near-term profitability creates medium-term sustainability and writedown risks reminiscent of previous telecom overbuild cycles.
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