Is the AI bubble leaking?
Rising pressure on artificial intelligence (AI) debt, growing scepticism around massive AI spending, and investors beginning to question whether the returns could justify the investments.
As CoreWeave’s bond yields recently surged to around 15–16 per cent, compared to roughly 9.7 per cent when the debt was issued in June, the focus remains on AI debt.
With hundreds of billions pouring into AI infrastructure, the real question is whether these companies can eventually generate enough revenue to justify the spending.
Because information isn’t shared equally, and because humans often resist being wrong, react slowly, or have different timelines, markets don’t always respond immediately to news that, in hindsight, might be an obvious sign the bubble is bursting.
What are some of the possible triggers investors should watch out for?
- Anthropic and Open AI innovate but stall on fundamental tech breakthroughs
- Anthropic/OpenAI annual recurring revenue growth slows, then stalls, as enterprise customers move from tokenmaxxing to rational token consumption and open-source model usage.
- A realisation in public markets that AI may not replace human labour in the next 1-3 years
- A realisation in public markets that a major fundamental breakthrough hasn’t occurred for at least a year
- A realisation in public markets that AI will not generate satisfactory return on investment
- A realisation in public markets that AI Hyperscaler and frontier lab spending is not sustainable
- Failed initial public offerings (IPO)s of Neoclouds et. al. cause future Anthropic/OpenAI equity raises to only occur in private markets because public markets are now closed
- Hyperscalers announce slowdown in Capex
- Hyperscaler bond yields rise to more than 10 per cent
- US 10yr Treasuries hit 5.50 per cent
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
He is also author of best-selling investment guide-book for the stock market, Value.able – how to value the best stocks and buy them for less than they are worth.
Roger appears regularly on television and radio, and in the press, including ABC radio and TV, The Australian and Ausbiz. View upcoming media appearances.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
