Debt-Fueled AI Growth Is a Concern for Markets, Top Stock Strategist Says

Big Tech stocks have dipped recently on speculation that the peak is in and a correction in high-flying AI names is imminent.

Front and center for investors is a relatively recent concern that heavy borrowing among AI companies could worsen the fallout of a bubble if it does end up popping.

Julian Emanuel, the equity strategy chief of Evercore ISI, agrees that high levels of debt have become a concern, particularly for those who remember the dot-com bubble of the late 1990s.

Emanuel told Bloomberg TV that, while he’s still bullish on the sector, he thinks investors are rightly comparing the current era of AI spending to the internet craze of 2000.

“When you think about the late 1990s, the problem with the bursting of the bubble, besides the fact that the Fed was hiking in 1999, was the fact that a lot of the build-out was financed by companies that were incurring debt and had no revenues on the other side,” he stated.

He highlighted the fact that a similar trend is playing out as debt issuance accelerates and as tech companies maneuver to quickly scale operations and pull ahead of competitors. Emanuel said the fears are “rational.”

Tech companies have been sprinting to tap the debt markets for financing lately, with hyperscalers like Amazon, Meta, and Oracle among the tech firms leading a global glut of bond issuance in 2025.

The combination of massive borrowing and uncertain payback from the companies propping up the stock market may make some investors nervous, as Emanuel said. The possibility of AI growth slowing or revenue taking longer to materialize could make it harder for tech leaders to service the debts they have incurred.

Additionally, these companies are no longer benefiting from the previously low interest rates, which could also prove problematic if the AI market starts to lose momentum.

Emanuel has spent the last few years spotting bubbles in the market. In 2019, he described the bull market in government bonds as the “greatest bubble ever,” predicting it could lead to significant losses for investors.

Just a few months ago, as markets prepared for Q2 earnings season, Emanuel warned that investors were likely too optimistic, predicting a market correction of up to 15%.

Although he’s cautious on the AI debt issue, the strategist still sees compelling opportunities for investors who can stomach a bit of risk.

“From a valuation perspective, as much angst as there is, in comparison in the late 1990s, these names are, I wouldn’t say cheap. But they’re certainly not expensive relative to their own history,” he said.