AI is not just the hottest stock market concept; it has already become a big story in the U.S. bond market.

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The artificial intelligence boom is spreading from the stock market to the bond market, with the debt scale of AI-related companies surpassing that of traditional banking, making it the largest sector in investment-grade bond indices.

According to the latest data from JPMorgan, AI-related companies currently account for 14% of the investment-grade bond index, with total debt reaching $1.2 trillion. As demand for AI infrastructure surges, related companies are borrowing heavily to support annual high capital expenditure requirements.

Oracle Model Sparks Debt Arms Race

Oracle has broken the previous model where AI infrastructure construction was mainly funded by self-raised cash flow, as the company is willing to take on leverage of hundreds of billions of dollars to seize market share. This has forced giants like Amazon, Microsoft, and Google to follow suit, further pushing up the debt level of the entire industry.

Previously, OpenAI pledged to pay Oracle $60 billion annually for unfinished cloud computing facilities. The news pushed Oracle’s stock price up by 25%, but at the same time, Oracle’s borrowing increased and its debt-to-equity ratio soared to 500%, far higher than Amazon (50%), Microsoft (30%), and Meta, Google.

Michael Cembalest of JPMorgan pointed out that Oracle’s pledged $60 billion annual expenditure simply cannot be paid out of cash flow and must be financed through equity or debt. This model is shifting the AI industry’s traditionally disciplined, cash flow-funded race into a debt-driven arms race.

Bubble Burst Risk Sparks Concern

Research by Bain & Company shows that building data centers to meet AI demand requires about $500 billion in capital investment annually, and Bain’s analysis of sustainable capital expenditure-to-revenue ratios for cloud service providers indicates that $500 billion in annual CAPEX equates to $2 trillion in annual revenue.

Even if companies shift all of their local IT budgets to cloud services, and reinvest funds saved by applying AI to sales, marketing, customer support, and R&D—which is estimated to account for 20% of those budgets—into new data center CAPEX, there would still be $800 billion less in income than needed to pay for the total investment.

Analysts warn that once the AI paradigm shifts—whether the market suddenly demands real returns on AI investments or a technological disruption occurs—the bursting of the AI credit bubble could cause even more serious economic consequences than a stock market crash. Once these debts, which are backed by future cash flow, default, they could impact the entire economic system.

Risk Warning and DisclaimerThe market carries risks, and investments need to be made cautiously. This article does not constitute personal investment advice, nor does it take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suited to their particular circumstances. Investments made accordingly are at their own risk. ```