Tom Lee Says Tighter Credit Conditions Could Prevent an AI Bubble

Fundstrat's Tom Lee argues that rising funding costs and tighter credit conditions may be helping prevent excessive investment from turning the AI boom into a speculative bubble.
According to Lee, AI-related debt issuance has reached the equivalent of roughly 50% of U.S. Treasury issuance, highlighting the enormous capital required to build AI infrastructure.
Meanwhile, credit default swap spreads have widened, signaling that investors perceive greater default risk. AI debt issuance has also declined, suggesting that higher financing costs are already imposing some discipline on spending.
Rather than allowing unlimited borrowing and unchecked investment, tighter credit conditions could act as a natural brake on AI infrastructure expansion. However, whether this is enough to prevent a bubble remains uncertain, particularly if valuations and capital spending continue to rise faster than future returns.