Fidelity’s director of global macro, Jurrien Timmer, says any AI bubble may be forming in debt markets rather than in stock valuations. In an X thread, Timmer pointed to the sharp drawdown in high-yield data center bonds last week, noting that yields on AI cloud provider CoreWeave’s bonds topped 15% even as equity valuations fall.
Credit Markets Flash a Warning
Timmer has been comparing the current AI boom to the 1998–2000 internet boom-turned-bust. He noted that historically, telecom gave the early warning as fiber optic networks were overbuilt, and that signal came from the debt side, not from dot-com stocks. He compared a Bloomberg index of junk-rated telecom bonds from that era with CoreWeave’s yield today, a comparison he said gives him pause.
Equity valuations are falling as earnings grow, which Timmer finds reassuring. Credit investors, however, are pricing part of the same buildout like a distressed borrower.
CoreWeave’s Debt Under Pressure
CoreWeave, which began as a crypto miner and now rents out AI computing power, saw its 2031 notes yield 15.78% last Thursday, according to CNBC. Five-year default insurance on its debt briefly cost more than 11% a year. S&P Global rates CoreWeave B+, below investment grade.
Debt rose from $21 billion at the end of 2025 to $35 billion by June 30, its results show. Net interest expense of $640 million took about a quarter of second-quarter revenue. However, CEO Mike Intrator said in a memo, CNBC reported, that contract backlog more than covers debt obligations. That backlog stood near $104 billion on June 30.
Stable Fundamentals vs. High-Yield Stress
Timmer says highly rated AI borrowers still look stable, citing the fundamentals of most hyperscalers, the largest cloud companies. He adds that stress in high-yield AI names could force discipline on the compute buildout, potentially slowing spending to a more sustainable pace.
In contrast, Citi’s Tyler Radke, co-head of US software research, attributes the selloff to higher borrowing costs rather than weak demand. The open question is whether tighter credit trims excess or starves the buildout. Chris White, CEO of bond data firm BondCliQ, says the AI debt glut may lift US government borrowing costs.
