Fidelity’s Timmer Sees AI Bubble Danger in Credit, Not Equities

Jurrien Timmer, Fidelity's director of global macro, believes that any AI-related bubble could be located in debt markets rather than equities. Last week, yields on CoreWeave, an AI cloud provider, exceeded 15% on its bonds, while stock valuations were declining.

Timmer takes comfort from the fact that stock valuations are dropping while earnings rise. Meanwhile, credit investors are treating some of the same infrastructure spending similarly to a borrower in distress.

Does Credit Signal a Warning for the AI Bubble?

In an X thread, Timmer noted that he has been drawing parallels between the current AI-era price movements and the internet boom of 1998 to 2000.

The big news last week was of course the sharp drawdown in high yield data center bonds and what that might mean for the broader AI buildout. I have been eyeing the price analog between the AI boom today and the internet boom-turned-bust in 1998-2000 and have been comforted by… pic.twitter.com/9YJvlkf7Tb

— Jurrien Timmer (@TimmerFidelity) October 21, 2026

In the past, the telecom sector provided an early warning when fiber optic networks were overbuilt. That signal originated from the debt market rather than from dot-com stocks.

Timmer drew a comparison between a Bloomberg index of junk-rated telecom bonds from that period and CoreWeave's current yield. He stated that the comparison makes him hesitant.

According to Timmer, highly rated AI borrowers continue to appear stable. He points to the fundamentals of most hyperscalers, the largest cloud operators.

He further notes that strain in high-yield AI names could impose discipline on the compute buildout. This could lead to spending slowing to a more sustainable level.

Could the Bond Market Be Wrong on CoreWeave?

CoreWeave started as a cryptocurrency miner and now leases AI computing capacity. Last Thursday, its 2031 notes yielded 15.78%, as reported by CNBC. Default insurance for five-year debt briefly exceeded an annual cost of 11%.

S&P Global assigns CoreWeave a B+ rating, which is below investment grade. According to its results, debt increased from $21 billion at end-2025 to $35 billion by June 30. Net interest expense of $640 million consumed roughly one-quarter of second-quarter revenue.

CNBC reported that CEO Mike Intrator stated in a memo that the contract backlog more than covers debt obligations. As of June 30, that backlog was approximately $104 billion.

By contrast, Citi’s Tyler Radke, co-head of US software research, blames the selloff on increased borrowing costs rather than on a lack of demand.

The unresolved issue is whether tighter credit will cut excess or choke the buildout. Chris White, CEO of bond data firm BondCliQ, argues that the glut of AI debt could raise US government borrowing costs.