JPMorgan Asset Management warns of AI-factor risk in fixed income

Gabriela Santos, Chief Market Strategist for the Americas at JPMorgan Asset Management, warned on August 18 that AI-related concentration risk has quietly metastasized from stock portfolios into fixed income markets. She calls it the “AI-factor” or, more colorfully, the “AI tentacle.” The tentacle reaches the bond market Companies building out AI infrastructure need enormous amounts of capital. They raise that capital by issuing bonds. When enough of them do it at the same time, the investment-grade corporate bond market starts looking a lot like the equity market: dominated by a few massive players chasing the same theme. Investment-grade corporate bond issuance has hit record levels for four consecutive months, with a meaningful share of that volume tied to AI-related financing needs. Santos specifically pointed to hyperscalers like Alphabet as key drivers of this wave, tapping bond markets to fund data centers, custom silicon, and the sprawling physical infrastructure that AI demands. What Santos recommends instead Santos isn’t suggesting investors abandon the AI trade. She remains bullish on what she describes as the ongoing AI super-cycle. The point isn’t to run from it, but t...