“It’s just like nothing we’ve ever seen before,” says Bryan Whalen, CIO of fixed income at $200 billion global asset manager TCW, in reference to AI’s capital spend, equity prices and momentum on the latest edition of Credit Exchange with Lisa Lee. “What we’re looking at here is just everybody on one side of the boat, too much enthusiasm,” he says.

“It just feels like it’s the beginning of the end of the euphoria.”

The AI spending spree has broken the natural feedback loop to slow down borrowing. While the bond market is raising the cost of borrowing, these companies turn around and say, ‘we don’t care,’ Whalen contends.

If the market starts to question the fundamental elements of the AI capital spend, that could lead not just to volatility in the sector, but for the rest of the market. And that would likely lead to an economic recession, reckons Whalen, who oversees $170 billion in AUM.