AI's bubble just entered a new phase. This one's debt-fuelled (www.afr.com)

Markets roared modestly after signs the US government shutdown was ending, pushing the S&P 500 within striking distance of its record high — but the broader story is a shift in how AI’s bull market is being financed. The headline claim: we’ve moved from an enthusiasm-driven run to a debt-fuelled phase, where cheap credit, corporate borrowing and structured financing are increasingly propping up AI valuations. That matters because leverage amplifies both upside and downside, making the AI sector far more sensitive to interest rates, credit spreads and sudden shifts in sentiment. For the AI/ML community this shift changes the risk calculus: startups and labs buoyed by debt-backed rounds or convertible securities may face harsher conditions if credit tightens, potentially slowing compute procurement, hiring and long-term R&D. Public AI plays and M&A also become more fragile — high leverage can accelerate deleveraging cascades and force asset sales at depressed prices. Technically, watch metrics like corporate leverage ratios, margin debt in AI-adjacent equities, and the composition of financing (equity vs convertible debt vs loans) — they’ll be leading indicators of how resilient the current AI funding environment really is.