Economist Warns of Rising Risk in Hyperscaler AI Debt Amid Comparisons to 2008 Crisis
An economist has raised concerns over the growing risk associated with debt used by major cloud computing companies, or hyperscalers, to fund their artificial intelligence infrastructure. Torsten Slok from Apollo Global Management noted that credit default swaps (CDS) on these firms' debt are now pricing in more risk due to weakening financial fundamentals rather than routine hedging activity. Slok highlighted the risks of a debt-financed AI expansion cycle marked by rising leverage, negative free cash flow, and uncertain returns. Dan Alpert from Westwood Capital compared this situation to pre-2008 mortgage crisis conditions but noted that banks are now better capitalized and more diversified than they were then. While some analysts remain skeptical about the immediate risk of a financial collapse in AI-related debt markets, others argue it could signal early warning signs. The debate centers on whether AI revenue will grow fast enough to justify current spending levels.
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Topics: 2008 crisis AI credit default swaps (CDS) economic comparisons hyperscalers