Source: Wolf Street
Despite massive capital expenditure on AI infrastructure with minimal corresponding revenue, bond markets remain complacent. Investors chasing yields in a low-rate environment and the outsized valuations of mega-cap AI stocks are propping up asset class correlations, masking a genuine solvency risk: if AI capex doesn't convert to cash flows within 18-24 months, the unwinding could force a sharp repricing across equities and fixed income simultaneously, leaving yield-chasers with losses in both. For commerce-dependent companies, this matters because their access to capital and cost of debt are increasingly tethered to the AI narrative rather than their own fundamentals.