Top Bond Firms Prepare for AI Bubble Burst as Tech Debt Issuance Hits $155B

According to Robert Cohen, manager at DoubleLine Capital, the firm and Oaktree Capital are adjusting portfolios this week to prepare for a potential AI bubble burst. Cohen stated at the Bloomberg Global Credit Forum that an AI bubble is "100% likely" and that bond valuations will reach bubble levels as tech companies continue pouring capital into AI development.

U.S. mega-cap tech companies' unsecured bond issuance has surged to over $155 billion this year, up 45% from the prior full year, according to Barclays. Data center operator Hut 8 issued $4 billion in investment-grade debt this week for Texas projects, which received 4x oversubscription. A separate $36 billion debt offering for AI chip purchases by Anthropic is nearing completion. The two bond firms are focusing on securities that can withstand deep credit cycles, with Oaktree noting that data center financing presents significant risks due to simultaneous project launches and extended construction timelines.