Pimco Warns $100 Billion-a-Quarter AI Debt Boom Has Triggered Credit Default Cycle
Updated
Updated · Crypto Briefing · Jun 10
Pimco Warns $100 Billion-a-Quarter AI Debt Boom Has Triggered Credit Default Cycle
3 articles · Updated · Crypto Briefing · Jun 10
Summary
Daniel Ivascyn said on June 4 that a sustained credit default cycle has begun, with losses set to rise well above the unusually low levels of recent years.
$100 billion in quarterly AI-related debt issuance is driving the warning, as hyperscalers increasingly borrow to fund data-center buildouts while capital spending climbs and free cash flow weakens.
Pimco said the risk is concentrated in lower-quality borrowers and already visible in direct lending, where shadow default rates and payment-in-kind structures have been increasing alongside energy-cost pressure.
The firm is still active in the trade: its $27 billion private-debt financing for Meta's Hyperion AI data center in October 2025 produced about $2 billion in paper profits.
For investors, Pimco's message is that investment-grade issuers with strong cash generation should hold up better, while high-yield and leveraged-loan portfolios with AI exposure face a tougher stretch.
How long can Big Tech burn cash on AI before this debt-fueled boom triggers a widespread market collapse?
As AI data centers drain power grids and water supplies, who will ultimately pay the price for this technological revolution?
Could 'shadow borrowing' in the private credit market be the hidden trigger for the next global financial crisis?
The $670 Billion AI Debt Boom: How Massive Borrowing Is Reshaping Credit Markets and Raising Systemic Risks
Overview
The report highlights how escalating investment in artificial intelligence infrastructure by major tech giants is driving massive capital expenditures and unprecedented borrowing, marking the start of a new credit cycle. This surge in debt is raising concerns about a looming increase in credit losses, especially in lower-quality credit segments like leveraged and private direct lending. PIMCO warns that the era of minimal losses is ending, putting portfolios exposed to lower-rated borrowers at greater risk. As high-yield and leveraged loan portfolios—particularly those focused on the AI sector—face a tougher outlook, the financial system must prepare for heightened volatility and potential defaults.