AI Becomes Largest Segment of Investment Grade Debt

Investment grade debt associated with artificial intelligence has reached $1.2 trillion and makes up 14 percent of the investment grade market. Many companies tied to AI are cash rich, have little debt, and have robust historical performance. For these reasons, equity valuations, and investor demand for the debt of these companies, have increased dramatically. There are some concerns among credit investors that a decline in the performance of the sector, which results in a sell-off in equities, could also materially impact debt valuations.