AI selloff widens global credit spreads to 17-month high

Global bond markets are showing their strongest risk-off signals in more than a year. A selloff in artificial-intelligence stocks and rising geopolitical tensions have pushed investors toward safe-haven assets. Corporate bond yield premiums worldwide widened to as much as 129 basis points, the most since May 2025, according to a Bloomberg index cited in Bloomberg's reporting. On Friday, October 23, spreads on dollar bonds of higher-rated Asian companies reached their widest since July of last year, Bloomberg reported.finance.yahoo.com+1

The widening shows that worry about debt-funded AI spending has spread from stocks into credit. Investors fear the technology won't produce profits soon enough to justify what is being spent on it.finance.yahoo.com

Asia Opens Weaker

Asian credit looked weak at Friday's open, traders told Bloomberg. Regional credit-default swaps widened about 1.5 basis points to 78, and China technology spreads were 3 to 5 basis points wider. China investment-grade spreads were indicated as much as 5 basis points wider, and India investment-grade and Korean spreads up to 3 basis points wider, according to the report.finance.yahoo.com

The move followed a rout on Thursday, October 22. The S&P 500 fell 1.2%, its worst day since July, and the Nasdaq Composite dropped 2.6%, the Associated Press reported. Meta Platforms fell 7% after its earnings report, and Lam Research dropped sharply after flagging supply constraints, TheStreet noted. Treasuries had their best day in more than two years. The 10-year yield fell back below 5% as a deepening AI rout, turmoil in France and fresh Mideast tensions drove demand for safety, Bloomberg reported. "People are all of a sudden terrified of the amount of bond issuance by AI-related companies," Mitch Goldberg of ClientFirst Strategy told CNBC.bloomberg.com+3

Bubble Debate Sharpens

The selloff has split prominent investors. On October 20, Citadel founder Ken Griffin said investors are "almost certainly" in an AI bubble. He told Bloomberg at Citadel's Future of Global Markets Conference that "any radical transformation of our economy is generally intertwined with a bubble," The Hill reported. Griffin also warned of a possible glut of graphics chips, saying "marginal pricing will actually go into freefall," Financial Express reported.thehill.com+1

Blackstone President Jon Gray disagreed after the firm's third-quarter results. "With AI, you're building capacity, and you're hoping you can keep up with the demand," he told Bloomberg TV, adding that "demand is almost parabolic." Deutsche Bank CEO Christian Sewing and BlackRock CEO Larry Fink also pushed back on bubble fears.bloomberg.com+1

Borrowing is the main concern. Amazon, CoreWeave, Google, Meta, Microsoft and Oracle had issued $193 billion in bonds as of early August, up from $16.7 billion in 2024, according to LSEG data cited by The Hill.thehill.com