For the first time, the "AI bubble" has become the biggest concern for credit investors, according to a Bank of America Corp. client survey, UNN reports with reference to Bloomberg.
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"Few are concerned about geopolitics or central bank policy errors," Bank of America strategists, including Barnaby Martin, wrote in a note on Tuesday.
About 23% of investment-grade respondents cited the threat of an "AI bubble" as their top concern, compared to 9% in Bank of America's previous survey in December, the publication writes.
According to the survey, fears about the potentially unsustainable growth of investments and valuations of AI companies surpassed "credit bubbles" in significance. Concerns about trade tensions and a global recession were also seen as the biggest risk in 2025.
Investors working with investment-grade bonds raised their forecasts for large corporate bond issuance to $285 billion this year, a "significant jump" compared to the $210 billion expected in the December survey.
"However, investors are more optimistic about the future scale of technological change, with only 10% saying their biggest concern is corporate obsolescence caused by AI," the strategists wrote.
Meanwhile, inflows are the main factor determining credit spread levels and sufficient to offset the weakening of bonds caused by AI-related risk, they noted.
The February survey included 54 Bank of America clients working with high-yield and high-quality bonds, including insurance companies, pension funds, and hedge funds.