Newscasts - AI debt surge could create market of 'haves and have-nots'

Royal Bank of Canada

09/12/2025 22:02

Click the following link to watch video: https://share.newscasts.refinitiv.com/link?entryId=1_71v9l2ki&referenceId=tag:reuters.com,2025:newsml_RW861209122025RP1_930&pageId=Newscasts
Source: 'Reuters - Business videos'

Description: Andrzej Skiba, head of U.S. Fixed Income at RBC Global Asset Management, explained the pros and cons of a fixed income market facing "an unprecedented increase" in AI-related debt issuance.

Short Link: https://lseg.group/44h2kcZ

Video Transcript:

Fixed-income markets are facing an unprecedented increase in debt issuance and a lot of that is coming from companies investing heavily in AI. And that's a big change. That's a big shift for fixed-income investors. They have been used over the years to regular issuance from banks, where normally after every quarterly earnings, major banks would issue debt. However, within the technology space, that issuance was sporadic. A lot of companies were swimming in tons of cash, so they had no need for that. But now, when we're looking ahead and you have hundreds of billions of AI-related spending- capital expenditure ahead, some of that will be funded by debt investors. And that's a big shift for the market considering how can we absorb at least $100 billion of issuance over the next 12 months related to AI. We think it's an opportunity because that allows investors to gain exposure to high quality businesses at valuations they might not have seen for quite some time. But at the same time, it also carries risks because clearly, there are some issuers that are running more debt on their balance sheets already, and the AI theme will need to continue showing progress for investors to be comfortable with increase in debt exposure to these issuers. So, it could easily become a market of haves and have nots as we traverse through 2026 and see how AI theme develops and what progress we see in its development.