JPMorgan Sees AI Financing Tighten and Warns Crypto Could Feel It
JPMorgan sees lenders taking a tougher look at AI companies as credit risks rise. That could also hit sentiment around Bitcoin and other risky crypto assets.
Key Takeaways
- JPMorgan says lenders are taking a harder look at AI companies and no longer want to finance them based only on the AI story.
- The cost of protection against default on AI-related debt has climbed to record levels.
- According to the bank, more doubt about AI financing could also hit sentiment around crypto and other risky assets.
Lenders are taking a harder look at AI companies and no longer want to finance them based only on the AI story, JPMorgan says. According to the bank, companies need to show they can pay for investments, carry their debt, and eventually generate cash flow. That also matters for crypto, because AI has been a major driver of risk appetite in financial markets over the past few years.
Credit Stress at AI Companies
JPMorgan says the AI label alone is no longer enough to reassure lenders. The warning comes at a time when the cost of hedging against default on debt from several AI-related companies has risen to record levels. These credit default swaps, or CDS, give investors a price for the risk that a company fails to meet its obligations.
The stress is also showing up in the broader market. The Nasdaq has fallen 6.7% since October 6 to 29,263, while AI-sensitive names like Nvidia and Oracle dropped more sharply than the index. According to Morgan Stanley, weekly trading in CDS on debt from Oracle, SpaceX, Alphabet, Amazon, Meta, Broadcom, and Nvidia rose to more than $9 billion (€8 billion) in September, up from less than $2 billion (€1.8 billion) per week in July.
Why Crypto Is Watching
For crypto, this matters because AI has been one of the strongest narratives behind risk appetite in the market, with Bitcoin as one of the main assets moving along with it. Both the coin and Nvidia hit a bottom within weeks of ChatGPT’s launch in late 2022 and have since recovered strongly. If doubts around AI financing keep building, that could also weigh on sentiment around risky assets. CoreWeave also shows how quickly investors can shift their focus from growth to debt and refinancing.
Signal for European Investors
For European crypto investors, this is mainly a sign that the market is looking beyond just Bitcoin’s price. The financing of big tech and AI companies can also affect overall risk sentiment, and that often spills over into crypto. S&P Global also pointed to a gradual weakening in the credit quality of major tech companies because of higher investment and complex financing structures, which further underlines that concern.
