Global markets were already fragile. Big AI bets could break them
SPY•Global markets face mounting risks from high debt, rising borrowing costs and uncertainty over whether huge AI investments will generate returns. Hyperscalers are estimated to invest $1.2 trillion in AI next year, on top of $900 billion this year.
1. Markets show strain
Investors grew more cautious in October as doubts about AI returns helped drive a selloff in technology stocks. More than $2 trillion in market value was wiped from the Nasdaq 100 last month, while the 10-year U.S. Treasury yield fell almost 20 basis points on October 22, its biggest daily drop since early 2023.
2. AI spending and debt
Danske Bank estimates that six U.S. technology firms known as hyperscalers will invest $1.2 trillion in AI infrastructure next year, following an estimated $900 billion this year. AI and technology stocks account for more than 40% of the S&P 500, while global debt has reached a record of more than $350 trillion, according to the Institute of International Finance.
3. Global vulnerabilities
The article cites rising bond yields in France and Japan, pressure on emerging-market currencies from higher oil prices, and governments’ limited ability to respond to a downturn. The Bank of England warned that global shocks could interact and amplify their combined impact. Investors also have reasons for optimism: 84% of S&P 500 companies that had reported third-quarter results so far beat consensus estimates.
