(Economist Leader) Either AI or public debt could crash markets. But probably not both

Two spectres talk financial markets. One is the fear that surging bond yields will make the rich world’s shaky public finances unsustainable, triggering a nasty fiscal crisis. The other is the worry that the revenues from artificial intelligence needed to keep the data-centre boom going will fail to arrive. As we report, that would devastate credit markets and cause a big fall in stocks, too.

The good news is that only an Ichabod Crane would think that both these scenarios could strike at once. Instead, investors must decide which story is scarier. For now, The Economist is more worried about sovereign debt.

For most of the year, concerns about governments have dominated. Between the end of February and the start of October, the yield on 30-year US Treasuries rose by a full percentage point. The Iran war has sent inflation up and forced central banks to raise interest rates. Strong economic growth and the rush to build data centres have caused a scramble for capital in which governments have had to compete with the private sector. In Japan, Britain and especially France, investors have fretted about the ability of governments to service their debts.

In recent weeks, though, the prospect of an end to the AI boom has scared the markets more. The five-year bonds of CoreWeave, a “neocloud” that rents out data centres, trade at a 15% yield, up from 10% in July. The company’s share price has fallen by about a third in the past month. The slowing revenue growth of Anthropic, an AI-model provider, has investors worried that the cash CoreWeave and its peers need may not arrive, or at least not quickly enough to pay their creditors. Interlinked financing means that pain could spread quickly, through both the ai supply chain and the private-credit and insurance firms that hold a lot of data-centre debt.

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For most of the year, worries about governments’ sovereign debt have dominated. Yet in recent weeks the prospect of an end to the AI boom has scared the markets more. Only in a big crash akin to the global financial crisis of 2007-09 would the two collide https://t.co/80gVNhvOZ9

— The Economist (@TheEconomist) October 22, 2026