The global credit market, centered on high-grade corporate bonds and high-yield corporate bonds (also known as junk bonds), is experiencing its most fervent state in two decades. This has prompted warnings from some of the world's largest asset managers, including Aberdeen Standard Investments and Pacific Investment Management Company (Pimco), urging caution against complacency in the red-hot credit market and the recent, record-breaking stock market rally. Historically, peak credit market exuberance has often preceded sudden credit spread widening, leading to plunging corporate bond prices and corrections in risk asset (equity) valuations. According to the latest compiled cross-currency and all-rating bond indices, the yield premium on global corporate debt—a manifestation of credit spreads—has narrowed to 103 basis points, its lowest level since June 2007. This phenomenon typically occurs against a backdrop of strong economic growth prospects and transformative technological shifts akin to the "internet era."
However, the increasingly massive scale of corporate bond issuance, particularly from tech giants like Oracle, Microsoft, and Meta Platforms, Inc., which may set historical records, could potentially drive significant credit spread widening. This optimistic and heated market presents a paradox. Fund managers are reluctant to miss allocation opportunities in corporate bonds, yet they must also accept that potential returns and risk compensation are diminishing amid growing underlying risks. These risks include unpredictable US fiscal and tariff policies, geopolitical tensions, and the potential for sudden corporate failures triggered by record debt issuance from AI computing infrastructure leaders like Oracle and mounting debt pressures. "In risk markets, 'complacency' should be the most feared word right now," said Luke Hickmore, Investment Director of Fixed Income at Aberdeen Standard Investments. "All you can do is not be overly positioned in higher-risk credit."
Currently, many fund managers continue to join the rally, partly driven by expectations that the Federal Reserve and other central banks will maintain their interest rate cutting cycle. Such an accommodative policy environment could help the global economy withstand ongoing tariff threats from US President Donald Trump. Earlier this week, the World Bank raised its global real GDP growth forecast to 2.6%, highlighting its confidence in the AI boom strengthening global economic resilience and the prospects for a US soft landing, bolstered by the Trump administration's policies. Within central banking systems, policymakers must balance efforts to sustain this growth momentum against the need to prevent inflation from re-accelerating. This delicate balancing act has been thrust into the public spotlight due to an ongoing investigation by the US Justice Department into Fed Chair Jerome Powell. The Fed Chair has indicated that the threat of criminal charges stems from the Fed setting rates based on its best assessments, rather than adhering to the Trump administration's pressure for more aggressive rate cuts.
Nonetheless, the current optimism in the credit market is also fueling demand for riskier debt assets. The extra yield investors demand to hold junk bonds has fallen to its lowest point in nearly two decades, reflecting growing optimism about economic growth prospects and persistently lower default expectations for high-yield corporate bonds. Beware! The bond issuance frenzy led by tech companies like Oracle could drive credit spread widening. "Strong recent investment returns are, conversely, exacerbating market complacency," wrote Pimco senior analysts Tiffany Wilding and Andrew Balls in a research note this month. Reportedly, Pimco's fixed income team is becoming more selective in its credit market allocations, anticipating a deterioration in credit market fundamentals and spreads.
Undoubtedly, tech companies closely linked to AI computing infrastructure, led by Oracle, are rapidly increasing their bond issuance. If this dynamic persists long-term, it will undoubtedly push credit spreads significantly wider. In fixed income analysis, credit spreads are considered a crucial early warning signal for risk appetite and economic expectations; therefore, when spreads widen, it often signifies that investors are becoming more cautious about credit risk and demanding higher compensation, ultimately leading to a substantial rise in market risk aversion. The current surge in corporate bond issuance, particularly speculative-grade and high-yield bonds, is notable, with 2026 corporate bond supply expected to continue hitting record highs. This is especially true for US large-cap tech companies and those related to AI computing infrastructure (e.g., massive issuance from Amazon AWS, Meta Platforms, Inc., Oracle, CoreWeave)—indicating immense market demand for cheap funding. The absorption of massive debt supply is manageable in a low-spread environment buoyed by investor optimism towards AI. However, if confronted with interest rate shifts, an economic slowdown, a rapid deterioration in these tech companies' fundamentals, or a much more severe "AI bubble" crisis sweeping through the bond market, all types of corporate bonds would become more sensitive and prone to valuation adjustments or declines.
According to Dealogic data, as of the first week of December 2025, global tech companies have issued a record $428.3 billion in bonds during 2025. US corporate bond issuance accounted for $341.8 billion, while European and Asian tech companies issued $49.1 billion and $33 billion respectively, with all three markets reaching historically high issuance levels. For the world's largest cloud service providers like Oracle, they face not only interest payment pressures but also structural risks from high reliance on single large customers (like OpenAI) for orders. John Stopford, Head of Multi-Asset Income at Ninety One, pointed out that when a borrowing boom coincides with new debt supply, rising borrowing costs will directly compress profit margins, potentially ultimately deflating the market's excessive imagination of the AI boom.
Data compiled by institutions shows that in the first half of January this year, global companies issued approximately $435 billion in bonds, setting a new historical record for the period—one-third higher than the same period last year. Goldman Sachs raised $16 billion through the largest-ever investment-grade bond issuance on Thursday, the largest debt sale in the Wall Street bank's history, leading many analysts to predict 2026 could be a record year for bond issuance volume. So far, the surge in bond supply has not triggered significant pullbacks or credit spread widening. This has contributed to a strong start for global stock and bond markets in 2026, extending the excess returns of US dollar-denominated investment-grade and junk bonds over 10-year US Treasuries seen over the past three years. However, if other risks (such as a new wave of AI bubble crisis) erupt later, shattering market optimism, the heavy supply of debt could panic investors.
A sudden, significant widening of credit spreads could potentially push the stock market into a correction trajectory. Since the "AI bubble narrative" swept global financial markets in late October, coupled with the massive borrowing and bond issuance spree by US tech giants including Meta Platforms, Inc., Amazon, and Oracle since the second half of 2025, and signs of panic and liquidity stress emerging in the private credit market, bond market flows lending to the highest-rated global companies are being deterred. This trend could significantly increase financing costs, substantially impact global corporate profits, and add new selling pressure to an already tense credit market.
The core of market anxiety centers on the AI investment logic itself. Recent exaggerated "AI circular investment" led by ChatGPT developer OpenAI, coupled with unprecedented large-scale borrowing by giants like Oracle to fund AI data center construction, jeopardizing their financial fundamentals, has heightened market concerns that the "AI bubble is about to burst." Most investors currently find it hard to believe that OpenAI, with annual revenue under $20 billion, can shoulder $1.4 trillion in AI infrastructure costs—despite OpenAI's ability to continuously secure tens of billions in funding, the market still prioritizes actual revenue generation. Over time, concerns that an "AI bubble is forming and its rupture is not far off" have continued to intensify. This sentiment is beginning to be reflected in mainstream institutional views. For instance, Pimco has warned the credit market against complacency, and a recent Goldman Sachs research report indicated that large tech companies investing the most to win the AI arms race may face highly uncertain returns on investment for a considerable time.
Against the backdrop of an intensifying AI computing infrastructure race, even cash-rich, high-grade tech companies are forced to borrow heavily to support related investments. Morgan Stanley predicts that total global investment in hyperscale AI data centers will reach approximately $2.9 trillion by 2028, with over half (around $1.5 trillion) needing to rely on external financing. This近乎赌注般的资本支出 places immense strain on previously robust balance sheets, and astute bond market investors are beginning to reassess the default risk of tech companies like Oracle. Narrowing credit spreads typically indicate strong market confidence in the economy and corporate debt repayment capacity, but this also leaves the market with extremely limited risk buffer space. Should market risk appetite suddenly turn negative, the fundamentals of heavily indebted tech companies like Oracle deteriorate rapidly, or bond market liquidity tighten due to record issuance volumes, spreads could widen quickly, implying potentially sustained declines in bond prices. Sudden spread widening often foreshadows correction pressure on risk assets like stocks and cryptocurrencies. This logic represents a standard risk repricing pathway within market risk frameworks—not baseless panic prediction, but a reasonable concern grounded in the historical correlation between bond and stock markets.
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