According to a report by Bank of America Global Research, the rapid expansion of artificial intelligence infrastructure spending is viewed as the most crowded trade in the market and the most likely source of a systemic credit event. The report cites a survey of 190 fund managers overseeing $512 billion, where 53% identified buying global semiconductor stocks as the most crowded trade. Furthermore, 42% of respondents named AI infrastructure spending as the top risk for a credit accident, up from 38% in the previous month.

The report highlights the financial strain on major AI customers, specifically Oracle. In its latest results, Oracle reported a capital expenditure of $28.5 billion in a single quarter, resulting in negative free cash flow of $5.4 billion. To cover this deficit, the company conducted a $20 billion at-the-market equity sale. Oracle’s full-year capital expenditure guidance stands at $90 billion to $95 billion, with management providing no timeline for a return to positive free cash flow.

Analyst Michael Hartnett noted that a record 33% of survey respondents believe companies are overinvesting in AI. The analysis connects this overinvestment to rising leverage and negative free cash flow, citing Oracle as a prime example where the gap between supplier revenue and customer debt is most visible.

Additional evidence from credit markets was provided by Apollo Chief Economist Torsten Slok. He observed that the cost to insure against defaults for hyperscalers—specifically a basket of Amazon, Google, Microsoft, and Oracle—has climbed above 100 basis points, the highest level in his eight-year series. In contrast, protection costs for major banks like JPMorgan Chase and Citigroup have remained stable near 40 basis points. Slok attributed this widening to a debt-financed spending cycle with uncertain payback on assets that may lose value over time.

Bank of America data indicates that the five largest hyperscalers are on track for approximately $700 billion in capital expenditures in 2026. Analysts project this figure could exceed $1 trillion in 2027. The report also notes that these companies have significantly increased their bond issuance, selling about $121 billion in U.S. investment-grade bonds in 2025, compared to an average of roughly $28 billion per year from 2020 to 2024.