AI Debt Is Spiralling Out Of Control
The real threat of AI is to the economy.
Tech bros want us to be profoundly scared of AI. They bang on about how it will render us all obsolete, how it will soon become dangerously superintelligent, and how these systems are necessary for global economic viability.. Of course, these are all demonstrably manipulative lies, as I, and many others, have pointed out time and time again. So, don’t fall for the propaganda. But there is one aspect of AI we should be worried about: debt. You see, the AI bubble in and of itself isn’t horrific; it is the fact that, through debt, it is tied to the very foundations of our economy. In other words, when this bubble inevitably explodes, it will almost certainly take everyone down with it. We have known about this ticking time bomb for a while now, but as AI debt racks up, it is increasingly looking like a nuclear bomb. Let me explain.
The Debt
J.P. Morgan has calculated that AI-related debt now accounts for 14.5% of its $10 trillion investment-grade bond index, meaning they alone currently hold $1.5 trillion in AI debt. Others believe AI debt makes up 15–20% of most corporate bond indices, suggesting that the current total AI investment-grade debt (bonds) could be much higher than $1.5 trillion. In fact, some have discovered that AI is linked to more debt than banks! That might sound like a lot, but don’t worry — it is only going to get considerably worse. Morgan Stanley estimates AI hyperscalers could raise $400 billion in corporate bonds (debt) in 2026 alone for AI data centres, and Gartner estimates that AI hyperscalers are going to spend $690 billion on AI infrastructure in 2026, with most of that funded by debt.
This involves a lot of big numbers, so let’s put it all into context.
The 2008 financial crisis is not a perfect analogy for the AI bubble by any means, but it can help offer some perspective. The crash occurred when roughly $1.4 trillion (roughly $2.1 trillion in today’s money), or about 40–45% of the subprime mortgage-backed securities (find out what they are here), were wiped out as their value was either written down or debtors defaulted. This caused the US bond market to take a record loss of 4.94%. As such, this figure heavily suggests that the dodgy subprime mortgage-backed securities made up less than 10% of the bond market at the moment it all collapsed.
Because the financial landscape is so different, we can’t draw any direction comparisons here. But we can say that AI debt might already be at the same level as subprime mortgage debt was in 2008, and that AI debt is currently taking up considerably more of the bond market than subprime mortgages did in 2008. So, in simpler terms, there is enough debt to cause a serious problem if these AI bonds default or are written down, and the entire financial system is far more exposed to this risk than it was to subprime mortgages back in 2008.
That should give you an appropriate sense of scale. But all of this debt is only a problem if those who take it on don’t have the profits to pay it back. So, can the AI industry cover these costs? And what happens if they can’t?
The Problem With AI Data Centres
Well, sadly, AI data centres aren’t what you would call profitable.
