AI credit concerns playing out differently in investment grade and high yield, Goldman says

By Lucy Raitano

LONDON, Dec 5 (Reuters) - Investor anxiety about the surge in AI-related debt is playing out differently across investment grade and high yield bonds, according to new research from Goldman Sachs.

There has been a surge in AI-linked issuance this year, as big tech firms and new AI players started turning to debt markets to help fund the global data centre build-out, alongside using equity and cash reserves. But some investors have been jittery about the trend, and AI-linked bonds are underperforming the broader credit market.

In a note released late on Thursday, Goldman Sachs says the worries appear to be more issuer-specific when it comes to investment grade credit, while in high yield, the concern is more sector-wide.     

INVESTORS GET CHOOSY, SEE OPPORTUNITY

Christopher Kramer, portfolio manager and senior trader on the investment grade credit team at Neuberger, told Reuters in a recent interview that the dramatic structural shift to AI-linked debt issuance by big tech companies creates opportunities for selective investors, though there will still be "haves and have nots".

"Doing the credit work on the 'on balance' sheet versus 'off balance' sheet continues to be paramount," he said. 

"But security selection is going to be the name of the game and we're excited just from the standpoint that the market's changing."

He did not comment on whether Neuberger, which manages assets amounting to $558 billion, had invested in any recent issuance of top quality AI bonds.

The Bank of England again warned this week that the growing role of debt in the AI infrastructure boom could heighten potential financial stability risks if valuations correct. Meanwhile AI stock valuations remain stretched. 

Goldman Sachs says the overall credit market is looking fundamentally healthy, but the underperformance of AI-related debt has grown over the past month.

ISSUER RISK VS SECTOR RISK

A basket of AI-related sectors that strips out direct AI issuers has outperformed a basket of non-financial bonds by 15 basis points in 2025. But a basket of AI-related sector bonds that includes direct issuers has underperformed the same non-financials basket by 70 bps year to date, the bank said. 

Goldman says this shows investors are worried about specific issuers rather than the sector itself in the investment grade market. 

The same comparison on the high yield side shows a broader drawdown for the AI-sector.   

AI-linked high-yield bonds and a sector-matched basket moved broadly in tandem for most of 2025, but have diverged sharply since early November, as high-yield bonds from direct AI issuers underperformed. Goldman says this divergence reflects a more nuanced picture in high-yield given its smaller cohort and indirect exposures. 

EXECUTION RISK PUTS SOME OFF

Al Cattermole, fixed income portfolio manager and senior analyst at Mirabaud, which manages assets amounting to around 30 billion Swiss francs ($37.4 billion), told Reuters that as of November 25, his team chose not to invest in any of the AI-linked investment-grade or junk bonds that recently hit the market, citing execution risk and opaque contracts in some deals.

"Until we see data centres being delivered on time and on budget and providing the computing power that they are intended to  - and there still being the demand for it - it is untested," he said.

"And because it's untested, that's why I think you need to be compensated like an equity...not debt."

($1 = 0.8030 Swiss francs)

(Reporting by Lucy Raitano; Editing by Amanda Cooper and Toby Chopra)