Hedge Funds Were 'Massive' Sellers of AI Debt, RBC's Skiba Says

Hedge funds have sharply reduced exposure to debt tied to the artificial-intelligence buildout, according to Andrzej Skiba, who leads BlueBay US fixed income at RBC Global Asset Management. Skiba described recent trading as a major capitulation, with leveraged investors closing positions and pushing substantial selling through the market. The retreat extends beyond AI: hedge funds have also sold debt issued by media and telecommunications companies, while Goldman Sachs data show they pulled back from technology stocks last month at the fastest rate in at least a decade.

The selling is occurring as questions grow about the viability of some data-center projects after Democrats’ midterm-election gains. About $500 million of data-center loans has been offered in an unusual sale, including a $25 million portion financing a New Mexico site associated with the Stargate venture involving OpenAI, SoftBank and Oracle. Skiba had earlier called AI a bust for fixed-income investors, but says wider credit spreads have made him more willing to own the debt. Financing costs for investment-grade technology companies have risen relative to the broader US market to their highest level since 2003. AI firms continue to borrow heavily, and much more issuance is expected to fund a buildout estimated in the trillions of dollars.