On the debt side, the largest tech companies have already issued more than $170 billion in corporate debt in 2026, exceeding their total for all of 2025 . Morgan Stanley estimates global AI-related debt issuance will top $500 billion annually . Goldman's Max Lukianchikov noted that so far, investors have been focused on yield, but warned that as AI spending continues to rise, "supply could begin to overwhelm demand" .

Brian Garrett's 'brutal' market warning

Goldman Sachs derivatives trader Brian Garrett issued a cross-market warning in July 2026 that has since circulated widely. He flagged that credit spreads on a large basket of technology company bonds widened by 22 basis points in a single week, while equities remain near all-time highs and volatility sits at rock-bottom levels .

Garrett warned that equity markets have historically ignored signals from credit markets "until they suddenly pay attention—and then everything falls apart" .

Goldman's own FICC desk described the situation starkly: "It is hard to remember a larger disparity between price and sentiment within IG [investment-grade] credit." The desk added that "the messaging from credit investors is increasingly clear that it will be very difficult to execute at current levels" .

Perhaps most tellingly, Goldman reported that the market's stress threshold has collapsed: where $75 billion in issuance once pressured the market, now only $25 billion does . This suggests that the bond market's capacity to absorb new AI-related debt is rapidly shrinking.

Bond-equity disconnect widens

There is a growing divergence between credit and equity markets. Credit spreads on tech bonds are widening—MSCI reports that credit spreads in IT and communication-services high-yield sectors have widened sharply in 2026 as fears of AI disruption grow —yet equities remain near all-time highs .

Investment-grade bond markets that had previously been a safe haven during AI-driven equity swings are now showing signs of strain . Goldman's FICC team described this as an unusually large disparity between price action in credit and the sentiment of credit investors . The message: bond investors are getting nervous, while stock investors are not yet pricing in the risk.

S&P downgrades Oracle to one notch above junk

On July 10, 2026, S&P Global Ratings downgraded Oracle's long-term issuer credit rating from BBB to BBB-, placing it just one notch above speculative-grade (junk) status . It was a watershed moment for the AI debt story.

S&P cited Oracle's rapidly rising AI infrastructure spending, negative free cash flow, and heavy customer concentration—especially its reliance on OpenAI, which S&P explicitly flagged as a credit risk. According to S&P, nearly half of Oracle's contractual obligations are tied to OpenAI, and should OpenAI encounter distress, Oracle would face "significant underutilized capacity and financial repercussions" .

Oracle's AI-related capex has surged to $95 billion with prolonged payback periods , and the company plans to raise an additional $40 billion through debt and equity to fund its data center buildout . Despite the downgrade, S&P maintained a stable outlook, and Oracle's stock initially shrugged off the news as investors focused on its $638 billion cloud contract backlog .

The downgrade was not a surprise to credit analysts. By December 2025, Barclays had already downgraded Oracle debt to underweight, projecting a cash exhaustion date of November 2026 based on current capex guidance .

BIS warns of systemic risk from an AI downturn

The Bank for International Settlements (BIS), in its June 2026 annual report (Chapter I: "Progress and peril"), raised direct concerns about the AI investment boom . The BIS noted that the five largest hyperscalers are set to spend over a trillion US dollars on AI-related capex from 2025 through 2026, and that these commitments are outpacing earnings and free cash flow .

The BIS warned that in the near term, the AI investment boom "raises questions about the sustainability of the current economic expansion," and that a downturn in the AI sector could have broad financial stability implications given the scale of debt and capital at risk .

This aligns with related warnings from investment firm Man Group, which described AI credit markets as at risk of a "violent" correction in June 2026, noting that investors face "significant execution risks and delays in development, yet they do not reap any equity benefits if the anticipated boom materializes" .

What this means for investors

The convergence of warnings from Goldman Sachs traders, the BIS, and rating agencies points to a market where unprecedented AI-driven debt issuance is straining credit markets, creating a dangerous disconnect between complacent equity markets and deteriorating credit conditions. Oracle's downgrade serves as the highest-profile corporate casualty so far, but the underlying dynamics suggest more may follow.

As one Goldman desk put it: the market's ability to absorb new supply has collapsed from $75 billion to $25 billion. If that threshold continues to shrink, the next AI-related bond deal could be the one that breaks the market's back.

On the debt side, the largest tech companies have already issued more than $170 billion in corporate debt in 2026, exceeding their total for all of 2025 . Morgan Stanley estimates global AI-related debt issuance will top $500 billion annually . Goldman's Max Lukianchikov noted that so far, investors have been focused on yield, but warned that as AI spending continues to rise, "supply could begin to overwhelm demand" .

Brian Garrett's 'brutal' market warning

Goldman Sachs derivatives trader Brian Garrett issued a cross-market warning in July 2026 that has since circulated widely. He flagged that credit spreads on a large basket of technology company bonds widened by 22 basis points in a single week, while equities remain near all-time highs and volatility sits at rock-bottom levels .

Garrett warned that equity markets have historically ignored signals from credit markets "until they suddenly pay attention—and then everything falls apart" .

Goldman's own FICC desk described the situation starkly: "It is hard to remember a larger disparity between price and sentiment within IG [investment-grade] credit." The desk added that "the messaging from credit investors is increasingly clear that it will be very difficult to execute at current levels" .

Perhaps most tellingly, Goldman reported that the market's stress threshold has collapsed: where $75 billion in issuance once pressured the market, now only $25 billion does . This suggests that the bond market's capacity to absorb new AI-related debt is rapidly shrinking.

Bond-equity disconnect widens

There is a growing divergence between credit and equity markets. Credit spreads on tech bonds are widening—MSCI reports that credit spreads in IT and communication-services high-yield sectors have widened sharply in 2026 as fears of AI disruption grow —yet equities remain near all-time highs .

Investment-grade bond markets that had previously been a safe haven during AI-driven equity swings are now showing signs of strain . Goldman's FICC team described this as an unusually large disparity between price action in credit and the sentiment of credit investors . The message: bond investors are getting nervous, while stock investors are not yet pricing in the risk.

S&P downgrades Oracle to one notch above junk

On July 10, 2026, S&P Global Ratings downgraded Oracle's long-term issuer credit rating from BBB to BBB-, placing it just one notch above speculative-grade (junk) status . It was a watershed moment for the AI debt story.

S&P cited Oracle's rapidly rising AI infrastructure spending, negative free cash flow, and heavy customer concentration—especially its reliance on OpenAI, which S&P explicitly flagged as a credit risk. According to S&P, nearly half of Oracle's contractual obligations are tied to OpenAI, and should OpenAI encounter distress, Oracle would face "significant underutilized capacity and financial repercussions" .

Oracle's AI-related capex has surged to $95 billion with prolonged payback periods , and the company plans to raise an additional $40 billion through debt and equity to fund its data center buildout . Despite the downgrade, S&P maintained a stable outlook, and Oracle's stock initially shrugged off the news as investors focused on its $638 billion cloud contract backlog .

The downgrade was not a surprise to credit analysts. By December 2025, Barclays had already downgraded Oracle debt to underweight, projecting a cash exhaustion date of November 2026 based on current capex guidance .

BIS warns of systemic risk from an AI downturn

The Bank for International Settlements (BIS), in its June 2026 annual report (Chapter I: "Progress and peril"), raised direct concerns about the AI investment boom . The BIS noted that the five largest hyperscalers are set to spend over a trillion US dollars on AI-related capex from 2025 through 2026, and that these commitments are outpacing earnings and free cash flow .

The BIS warned that in the near term, the AI investment boom "raises questions about the sustainability of the current economic expansion," and that a downturn in the AI sector could have broad financial stability implications given the scale of debt and capital at risk .

This aligns with related warnings from investment firm Man Group, which described AI credit markets as at risk of a "violent" correction in June 2026, noting that investors face "significant execution risks and delays in development, yet they do not reap any equity benefits if the anticipated boom materializes" .

What this means for investors

The convergence of warnings from Goldman Sachs traders, the BIS, and rating agencies points to a market where unprecedented AI-driven debt issuance is straining credit markets, creating a dangerous disconnect between complacent equity markets and deteriorating credit conditions. Oracle's downgrade serves as the highest-profile corporate casualty so far, but the underlying dynamics suggest more may follow.

As one Goldman desk put it: the market's ability to absorb new supply has collapsed from $75 billion to $25 billion. If that threshold continues to shrink, the next AI-related bond deal could be the one that breaks the market's back.