AI Bubble Deflating, Not Bursting, Yardeni Says as Bond Markets Ration Capital

Ed Yardeni, president of Yardeni Research, believes the AI bubble is losing air without a sudden rupture. According to him, bond investors are rationing capital to AI borrowers, while Elon Musk has warned that over 200 AI cloud firms could collapse.

Oppenheimer's head of technical analysis, Ari Wald, similarly rules out a collapse. He points to lower highs in small caps and credit as potential burdens for investors holding both.

Can Bond Markets Regulate AI Outlays?

Yardeni asserts that bond investors are assessing AI borrowers with more rigor and speed than credit rating agencies. He views this discipline as the most favorable outcome.

He summarized this view during his segment appearance.

“I think air is coming out of the bubble without the bubble bursting, which is the best solution to all these concerns.”

Ed Yardeni, CNBC

Over the weekend, Musk issued a warning regarding AI cloud firms. He stated that lenders have largely stopped funding companies whose sole business involves running AI data centers.

Yardeni concedes that some AI firms will not make it. Even so, he expects stronger entities to rescue the weaker ones.

Anthropic submitted its public registration for an initial public offering (IPO) on Monday. Shares of chip, memory and AI cloud companies traded higher.

Yardeni suggests Anthropic could use the IPO proceeds to aid a struggling AI cloud provider. However, the filing only lists general corporate purposes and contains no mention of commitments for material acquisitions or investments.

Does Narrow Market Breadth Still Signal a Peak?

Days when the S&P 500 dropped by at least 1% while a majority of stocks rose have been highlighted. Of the 13 such days since 1990, seven occurred in 1999 and 2000.

Wald continues to expect a year-end rally, citing oversold conditions. He cautions that lower highs in small caps, market leadership and credit could weaken it. This could set the stage for a market reset in 2027.

Meanwhile, global credit spreads—the additional yield lenders demand over safe bonds—have risen to their highest level since May 2025. Anthropic's IPO will test whether fresh capital shores up weaker AI borrowers, consistent with Yardeni's expectations. Rising defaults would cut against his interpretation.