Man Group Flags Bubble Risks as AI Infrastructure Bond Issuance Hits Record $142 Billion in H1 2026

The warning centers on concentrated issuance from three hyperscale cloud providers whose combined capital expenditure now exceeds $220 billion annually. Bond covenants show minimal revenue linkage requirements and heavy reliance on projected utilization rates above 85 percent, levels not yet demonstrated at current build scales. Secondary market spreads on these issues have compressed to 85 basis points despite leverage ratios climbing past 3.5 times EBITDA.

Primary records from S&P Global and Federal Reserve flow-of-funds data confirm the issuance surge is concentrated in 7- to 10-year maturities with minimal amortization until 2029. This structure transfers refinancing risk to a period when current-generation AI hardware will face obsolescence pressure from next-node chips. Comparable episodes in 1999-2000 telecom debt and 2015-2016 shale bond markets showed default rates rising above 9 percent once capex growth slowed below 20 percent year-over-year.

The incentive misalignment is clear: issuers capture near-term valuation gains while bondholders bear duration and technology risk. Man Group’s position highlights that three counterparties now account for 68 percent of rated AI infrastructure debt, creating single-sector concentration not seen since pre-2008 housing RMBS. Continuation of present issuance pace would push total AI-related leverage past $400 billion by end-2027 absent any demand verification.

Next data points to monitor are Q3 capex guidance from the three dominant issuers and any Federal Reserve senior loan officer survey tightening on technology sector credit. A 15 percent or greater sequential decline in planned spend would trigger the first material repricing of these bonds since issuance.