Key Points
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The evolution of AI is the hottest trend on Wall Street since the advent and proliferation of the internet in the mid-1990s.
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Long-duration corporate bond prices are plunging for foundational AI companies.
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The puzzle pieces for an AI bubble-bursting event are falling into place.
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More than 30 years ago, the advent and proliferation of the internet changed the growth trajectory of corporate America forever. Since then, investors have been impatiently waiting for Wall Street’s next “internet” moment, and they appear to have it with the artificial intelligence (AI) revolution.
Empowering software and systems to make split-second, autonomous decisions is a multitrillion-dollar global opportunity that’s benefiting AI hardware and applications companies alike. The AI infrastructure build-out catapulted Nvidia (NASDAQ:NVDA) to a $5 trillion market cap and vastly increased the market caps of Space Exploration Technologies (NASDAQ:SPCX), better known as SpaceX, Oracle (NYSE:ORCL), and neocloud company CoreWeave (NASDAQ:CRWV).
Missed AI’s “Act 1”? Act 2 Could Be 15x Bigger. Most investors think they missed the AI boat because they didn’t buy Nvidia in 2005. But according to our analysts, we’re only at the end of “Act 1″—the R&D phase. “Act 2” is the global rollout. Continue »
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While growth expectations for these AI infrastructure giants have been off the charts, red flags are also mounting. In particular, the bond market is sending a dire warning to Wall Street about the jaw-dropping amount of capital being spent on the data center build-out. The question is: Is anyone paying attention?
Bond traders are sending an unmistakable warning to AI investors
Throughout much of 2026, the rapid rise in long-duration Treasury bond yields (10-, 20-, and 30-year yields) has been the talk of Wall Street. But within the AI arena, long-duration corporate bonds are also sending an unmistakable warning to investors.
Shortly after SpaceX went public in June, Musk’s company issued $25 billion in debt, spanning five different maturities. When public companies sell bonds, the issue price is usually right around par value of $1,000, but is quoted as $1. Since SpaceX’s 2056 bonds were issued, they’ve been tumbling precipitously. Earlier this week, they fell to $0.84, pushing the yield to north of 8% (bond prices and yields are inversely related).
This steady decline in SpaceX’s longest-duration note could easily be attributed to the company’s historical operating losses, its vast cash needs, and uncertainty about its operating model over the long term. But this retreat in corporate bond prices (and thus a surge in yields) isn’t unique to SpaceX.
Earlier this week, we witnessed several long-duration corporate bond prices for foundational AI stocks hit all-time lows:
- Nvidia’s 2060 notes have plunged to less than $0.63 on the dollar.
- Oracle’s 2065 notes have plummeted to roughly $0.70 on the dollar.
- CoreWeave’s 2031 notes have tumbled below $0.80 on the dollar.
In other words, there’s growing skepticism among bond traders that AI stocks, including Nvidia, will make good on their debt obligations.
Rapidly rising odds of additional interest rate hikes are one reason the bond market may be skeptical of AI stocks. The AI infrastructure build-out is being financed in part with debt. If lending costs rise and this data center expansion slows, even marginally, it could topple the second-priciest stock market in history.
However, historical precedent may be the bigger concern. Since (and including) the advent of the internet in the mid-1990s, every game-changing technological innovation has navigated an early-stage bubble-bursting event. These bubbles form and subsequently burst because investors have a terrible habit of overestimating the pace of adoption and/or optimization of tech innovations.
The good news is that AI doesn’t have an adoption problem, as evidenced by the otherworldly amount of capital being spent on the data center build-out. But it’ll likely take several more years before businesses optimize AI solutions to maximize sales and profits.
The puzzle pieces are in place for an AI bubble-bursting event, and corporate bond prices reflect this.
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Sean Williams has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia and Oracle. The Motley Fool has a disclosure policy.
