🔔 Bond Giants Preemptively Position for AI Bubble Burst: Buying Credit Bonds That Can Survive a Deep Cycle Huo Xing Cai Jing reports that on June 7, DoubleLine Capital and Oaktree Capital are positioning ahead of a potential AI bubble burst by carefully selecting bonds that can withstand a deep credit cycle. Robert Cohen, portfolio manager at DoubleLine Capital, stated bluntly at the Bloomberg Global Credit Forum that “the probability of an AI bubble is about 100%.” He argues that as tech companies continue pouring massive capital into AI, markets will inevitably reach bubble levels within months or years. Cohen defines a credit bubble as investors financing companies that require real growth to service their debt—a pattern historically seen in the collapse of tech booms. He advocates seeking out issuers capable of surviving through structural safeguards or strong balance sheets, rather than those reliant on future growth expectations. Debt issuance in the AI sector has surged to unprecedented levels. According to Barclays, U.S. mega-tech firms have issued over $155 billion in global unsecured bonds this year alone—an increase of more than 45% compared to all of last year. Bloomberg Intelligence forecasts corporate AI capital expenditures will reach approximately $5 trillion over the next five years, with a significant portion funded by debt. This week alone, Hut 8 raised around $4 billion in investment-grade bonds to finance NVIDIA-related data center projects, receiving four times oversubscription. Anthropic is also nearing completion of a $36 billion bond issuance to fund chip purchases. Christina Lee, Co-Portfolio Manager of Private Credit at Oaktree Capital, noted that while opportunities in data center financing are vast, careful selection is essential: “It’s still unclear who will win and who will lose.” PIMCO Group’s Chief Investment Officer Dan Ivascyn took an even more cautious stance, arguing that AI is not suitable for overweighting—but precisely because financing demand is so enormous, value can be unlocked while maintaining a defensive posture. He warned that default losses could exceed historical norms. Ray Dalio of Bridgewater Associates cautioned that major technological revolutions are always accompanied by excessive speculation, leaving companies trapped in a dilemma: “Either invest heavily to seize market share, or underinvest and cede it to competitors.”