Reuters has featured insights from Minotaur Capital, our Australian-based global equities fund, in its coverage of how the AI rout is pushing investors out of stocks and into government bonds.
The article examines a sharp sell-off in global equities as concerns mount over debt-fuelled AI spending. Treasuries rallied despite a hotter-than-expected US inflation report, with bonds acting as a hedge for stocks. Meanwhile, the Philadelphia SE Semiconductor Index fell for a sixth straight session, and South Korea's KOSPI, an epicentre of the AI boom, sank 8%.
Our portfolio manager, Armina Rosenberg, highlighted the fragile economics behind much of the AI build-out:
"Much of the spending is by companies borrowing to rent computing power to AI labs that don't yet earn enough to cover the bill."
Pointing to data centre operator CoreWeave, which has issued $22 billion of bonds and $26 billion of loans according to LSEG data, she added:
"When CoreWeave's bonds yield 15%, investors are asking whether the end customers will make enough money to keep paying in three or four years."
The key question for investors is whether massive AI spending will pay off soon enough. We believe understanding who ultimately pays for AI infrastructure, and when, is essential as markets reassess the payoff timeline for these investments.
To read the article, click the link below.