Author: Zhang Yaqi
The AI stock sell-off spreads to the bond market, with SoftBank’s USD bonds leading the decline
The sell-off in AI stocks has spread from the stock market to the credit market, with SoftBank Group hit hardest, as its dollar-denominated bonds posted their largest single-day decline in nearly ten weeks.
SoftBank's USD bonds maturing in 2032 fell 0.9 cents on Friday, while its stock plunged as much as 16% during trading. Meanwhile, credit spreads for Asian investment-grade USD bonds widened by at least 3 basis points, and actively traded Asian high-yield bonds also came under significant pressure. The volatility in credit markets, combined with rising fiscal deficits, higher oil prices, and increasing inflation, has introduced new downside risks to a global economy that had previously been supported by the AI spending boom.
This selling pressure is a continuation of a broader repricing in global credit markets. The debt-fueled rally driven by the AI boom has already pushed yields higher, and the recent market volatility has further accelerated this trend. According to Bloomberg data, the average spread for Asian investment-grade dollar bonds rose to 73 basis points on Thursday, the widest since July 2025.
The selling pressure in credit markets still remains weaker than in the stock market.
Despite pressure in the credit markets, the intensity of this sell-off has been明显 lower than in the equity markets. Analyst Zerlina Zeng from CreditSights noted that the decline in U.S. Treasury yields has provided some cushion for investors focused on overall yields.
"Sales in the U.S. and Asian markets have been relatively restrained," said Zeng. She added that the sharp decline in October has attracted many investors to buy undervalued portions of Asian high-yield bonds, including relatively stable real estate credit bonds.
AI-related stress transmission to credit
The core issue in the current market is whether the accumulated pressure from AI investment热潮-related companies will trigger a more sustained repricing in Asia’s credit markets.
On Thursday, U.S. stock markets lost approximately $2.3 trillion in market value in a single day, with credit default swap spreads for CoreWeave, SpaceX, and Broadcom surging to historic highs. Dutch bank ING is reportedly seeking to sell a $500 million portfolio of data center loans. Meanwhile, according to Zeng, the Democratic sweep, recent heavy bond issuance by mega-cloud companies, and negative news regarding Oracle’s data center permits in New Mexico have further pressured spread performance.
In terms of actual cash flows, signs of stress emerged well before this round of volatility. Andrzej Skiba of RBC Global Asset Management said on Bloomberg Television on Thursday that hedge funds have significantly sold off AI-related bonds in recent weeks, increasing the risk that the repricing of AI-related debt will spread more broadly across global credit markets.
The long-term thesis remains intact; the market may be resetting rather than collapsing.
Despite recent volatility, some market participants view this sell-off as more of a decongestion of crowded trades rather than the end of the AI investment cycle.
Brian Levitt, Chief Global Market Strategist at Invesco, said:
The pace of AI development may now become slower and more disciplined. However, the long-term demand for AI and computing power remains intact, and the price investors need to pay for this opportunity is merely being recalibrated.
Zerlina Zeng noted that investors have already begun assessing the impact of the U.S. midterm election results on tariff policies, AI investments, the situation regarding a potential war with Iran, and U.S. Treasury supply, and have proactively reached out to her. "Bond supply pressures in the AI-related sector remain a key market focus," she said.
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