🧾 AI on Credit

Until recently the AI build-out was easy to defend: Microsoft, Alphabet and Meta paid for their data centres out of cash, and if they overbuilt, shareholders would grumble and move on. As the bills grew, bondholders, private credit funds and vehicles parked off the giants' balance sheets took over the funding. In mid-October the IMF, in its twice-yearly financial health report, flagged "rising leverage in the AI ecosystem". CoreWeave, which rents Nvidia chips by the hour, lost about a quarter of its value in a week while its bonds fell until they yielded in the mid-teens, what you charge people you don't expect to see again. Gartner reckons data-centre owners need $8.5T of revenue by 2030 to cover costs and a 12% return. It expects them to collect under $1.8T.

Nvidia sells CoreWeave its chips. Nvidia owns a piece of it. Nvidia has promised to rent any capacity CoreWeave can't sell elsewhere. (Picture a flour mill that owns half a pizzeria and buys every pizza nobody ordered.) Creditors looked at that and lent more. Economists who combed 42 countries from 1950 to 2016 found that when credit and prices in one sector both surge for three years, the odds of a crisis in the next three hit about 40%, against 7% normally. AI ticks both boxes. Sure, a stock crash alone is survivable: the dot-com bust erased 78% of the Nasdaq and the banks barely noticed. Debt is what turns "we misjudged demand" into "nobody can refinance anything".

The SNB, Switzerland's central bank, held $191.4B of US shares at the end of June, Nvidia its biggest line. Two thirds of what the SNB pays out go to the cantons, Switzerland's 26 self-governing states, so a bad quarter in Santa Clara reaches a budget in Aargau. But the SNB buys those shares with francs it creates itself, so there is no lender to panic: it lost CHF132B in 2022, paid the cantons nothing and nobody needed rescuing. Parliament wants UBS to carry more of its own money. In September the Council of States, the upper house, voted to make the bank back 90% of its foreign subsidiaries with shareholders' equity, about $16B more. The lower house votes next, and voters may settle it in a referendum.

Credit Suisse, sick for years, died in a few days in March 2023, when clients pulled their money out, and Bern, the federal government, had to line up more than CHF200B of liquidity and guarantees with the SNB to marry the bank off to UBS by Sunday night. AI does not need to fail for its lenders to get hurt. It only needs to arrive later than the repayment schedule. Switzerland has already had that weekend. America is financing its own.