AI bubble burst to hit fixed income?

The market is growing increasingly pessimistic about the fortunes of AI companies.

"I think no company is going to be immune,” said Google’s CEO, Sundar Pichai, to the BBC about the potential AI bubble fallout. Professor Aswath Damodaran, in a recent appearance on the Prof G Markets podcast, noted that it may be time to explore non-financial asset categories, such as collectables and cash. 

Such comments add concerns to just how big a potential burst could be and whether it could spill into fixed income markets.

Few insurers will allocate specifically to such bonds; however, if the bonds of such AI companies are included in multi-credit and structured bond products, this could heavily affect insurers.

Any bubble could pose a systemic risk to insurers by creating an environment where asset portfolios are vulnerable to sudden, large shocks that could affect their core function of providing financial security to the main insurance operation of the company.

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