Original author: Zhang Yaqi
Original source: Wall Street Insight
The wave of selling AI stocks has spread from the stock market to the credit market, with SoftBank Group being the first to be hit, as its U.S. dollar bonds recorded the largest single-day decline in nearly ten weeks.
SoftBank's U.S. dollar bonds maturing in 2032 fell 0.9 cents on Friday, while its stock price dropped as much as 16% during the trading session. Meanwhile, the spread on Asian investment-grade U.S. dollar bonds widened by at least 3 basis points, and actively traded Asian high-yield bonds also faced significant pressure. The volatility in the credit market, combined with rising fiscal deficits, soaring oil prices, and cooling inflation, has created new downside risks for the global economy, which had already been boosted by the AI spending boom.
This sell-off is a continuation of a broader re-pricing in the global credit market. The debt-driven frenzy fueled by the AI boom has pushed up yields, and the recent turmoil in the stock market has further accelerated this process. According to data compiled by Bloomberg, the average spread on Asian investment-grade U.S. dollar bonds rose to 73 basis points on Thursday, the widest since July 2025.
The intensity of the credit sell-off is still weaker than the stock market
Although the credit market is under pressure, the intensity of this round of selling is significantly lower than that in the equity market. CreditSights analyst Zerlina Zeng pointed out that the decline in U.S. Treasury yields has provided some buffer for investors focused on overall yields.
"The sell-off in the U.S. and Asian markets is relatively restrained," Zeng said. She added that the significant drop in October has attracted many investors to buy some Asian high-yield bonds at lower prices, including some reasonably performing real estate credit bonds.
Pressure related to AI is transmitted to credit
The core issue in the market currently is whether the pressures accumulated by companies associated with the AI investment boom will trigger a more sustained re-pricing in the Asian credit market.
On Thursday, the U.S. stock market lost about $2.3 trillion in market value in one day, and the credit default swap spreads for CoreWeave, SpaceX, and Broadcom surged to historical highs. ING is reportedly seeking to sell a portfolio of approximately $500 million in data center loans. Meanwhile, Zeng revealed that the Democratic Party's total victory, a surge in bond issuance from super-large cloud computing enterprises, and negative news regarding Oracle's data center license in New Mexico are all further suppressing spread performance.
In terms of actual capital flow, signs of pressure appeared earlier than this round of volatility. Andrzej Skiba from RBC Global Asset Management indicated during an interview on Bloomberg TV on Thursday that hedge funds have significantly sold off AI-related bonds in recent weeks, which has intensified the risk of re-pricing AI-related debt spreading more widely into the global credit market.
Long-term logic remains intact, the market may be resetting rather than collapsing
Despite the recent turbulence, some market participants believe this round of selling resembles a liquidation of crowded trades rather than the end of the AI investment cycle.
Brian Levitt, Chief Global Market Strategist at Invesco, stated:
"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 just being recalibrated."
Zerlina Zeng noted that investors are already assessing the impact of the U.S. midterm election results on tariff policies, AI investments, the situation in the Iran war, and U.S. Treasury supply, and actively communicating with her. "The supply pressure on bonds related to AI remains a market focus," she said.
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