AI Bubble?

On Monday, the British publication The Economist (subscription required, but well worth it) took a deep dive into concerns about an AI bubble.

To be sure there is cause for concern. Referencing CoreWeave, The Economist notes that the price of its five-year bond “has fallen by 16% since July. The bond’s yield is now 15%—a level associated with companies in financial distress—up from 10% in July.” Other companies are in a similar position.

On top of this, the borrowing continues to surge. “Oracle, a software pedlar turned cloud provider, has now racked up $169bn of borrowings, with $25bn-worth issued this year. SoftBank and SpaceX, two other companies with big cloud ambitions, have taken out a further $91bn of debt since the start of January.”

But before anyone panics, The Economist points out that “investors on the whole are not yet panicking about the debt binge. Only about 15% of the value of AI-related bonds issued this year have junk status. And although the various backstops in place make the stock of AI debt more difficult to interrogate, the cash-rich balance-sheets of companies like Nvidia would help to absorb any shock.”

The biggest concern? That demand for AI stagnates or begins to move into reverse.

Reigning in AI

GeekWire reports that “Microsoft is coming out with new security tools that treat AI agents as potential insider threats, continuously assessing their risk and restricting their access when something changes. The features, announced Monday, are part of Microsoft 365 E7, the company’s top-tier bundle of workplace software and AI tools, and its Project Perception security system.”

In addition to upping security, the new suite is also key to Microsoft winning over businesses, as it competes with Google, Amazon Web Services, CrowdStrike and Okta.