AI debt spree faces investors’ earnings test

Binaya Dahal

Journalist

14 July 2026

The rate of corporate borrowing to fund AI infrastructure is emerging as a key test for financial markets, with investors likely to demand stronger evidence that record spending can generate sustainable earnings growth, according to RBC BlueBay Asset Management.

Mark Dowding, chief investment officer for fixed income at the $153 billion Canadian asset manager, said strong demand continues to support debt issuance despite higher interest rates and renewed geopolitical tensions, but warned the question around AI earnings “is only likely to grow in significance in the months ahead”.

“An abrupt reversal of sentiment surrounding AI could represent a significant macro shock. That said, we still see little sign of this occurring for the time being,” he said. 

Meanwhile, Dowding said market sentiment remains positive, pointing to U.S. Treasury yields, which continued to push higher over the past week despite President Donald Trump’s declaration that the ceasefire with Iran was over.

“Investors have concluded that there seems very limited appetite for the US administration to be dragged back into a regional quagmire,” he said. 

“Consequently, this narrative has helped to dampen volatility. As a result, prevailing market sentiment continues to lean towards a summer of owning carry.

“This has meant that ongoing demand for new equity and debt issuance remains robust for now, and in this context, this week’s Amazon jumbo USD25 billion new corporate bond issue, represented the 7^th deal of this size since the start of 2026.”

However, Dowding warned the volume of fundraising itself is becoming a constraint as investors begin questioning whether companies can justify increasingly ambitious investment plans.

“The sheer volume of new debt (and equity) issuance appears to be a growing constraint, which is capping upside price momentum,” he said.

“It seems very natural to expect that this dash to raise cash is going to see markets become worried with respect to the efficacy of large-scale corporate investment programs.”

He argued that AI investment could also keep US inflation elevated by sustaining demand for semiconductors and other technology inputs, reducing the likelihood of rapid monetary easing.

“What may currently be more important for fixed income investors is that we see the robust AI investment dynamic makes it likely that US inflation will be relatively slow to fall and this is likely to keep the Fed on a hawkish path,” Dowding said. 

He added money markets are broadly pricing the Federal Reserve’s policy path fairly, with expectations centred on a September rate increase followed by another move next year.