DoubleLine, Oaktree Brace for Potential AI Pain
Credit heavyweights like DoubleLine Capital LP and Oaktree Capital Management are buying debt that can perform well if the artificial intelligence boom turns into a credit bust. Investing in debt tied to AI is difficult because many of the securities for sale now will not mature for decades, when current technology may be obsolete. Companies are flooding the market with debt, with the big US tech firms known as hyperscalers having sold more than $155 billion of unsecured bonds globally, and plenty more borrowing is coming.
➤ Major credit firms like DoubleLine and Oaktree are strategically investing in debt that could perform well during a potential AI-driven credit bust. ➤ The AI boom is leading to a significant increase in corporate debt issuance, particularly from tech hyperscalers, raising concerns about future market froth and obsolescence of long-term debt. ➤ While acknowledging the risks and uncertainties, these firms are selectively investing, recognizing the massive funding needs of the AI sector and the potential for attractive opportunities amidst potential market shakeouts.
