Felix Nikolas Prehn on tastylive: Borrowing to Fund AI

Felix Nikolas Prehn appeared on the tastylive programme in July 2026. He discussed what he called the most important story of the week: growing debt financing behind artificial-intelligence infrastructure. His central concern was that bond markets were signalling distress even as equity indices stayed buoyant.

Prehn pointed to the SpaceX bond, which he said had fallen roughly 10 per cent since issuance. He noted that this decline had occurred despite no deterioration in the company's operations. In his view, the price action reflected a broader unwillingness among lenders to carry AI-adjacent debt.

He cited reporting by the Financial Times and what he described as an internal Goldman Sachs communication. According to Prehn, these sources suggested that lenders were attempting to offload AI-related debt from their balance sheets. Prehn argued that this pattern warranted attention. He contended that every major financial crisis he could point to had originated in credit markets.

The conversation turned to vendor financing among large technology companies. Prehn contended that roughly half of the revenue reported by AI infrastructure providers was financed by the hyperscalers themselves. A cloud company might extend capital to a customer, who then spends it on that same provider's services. The resulting payment is then booked as revenue. Prehn stressed that the practice is legal but argued its current scale is unprecedented.

He compared the present situation to earlier speculative episodes. The dotcom episode was built around the internet, and the nineteenth-century railway mania around rail. Each technology functioned well, yet in his telling each period still ended with far too much leverage.

IBM's share price, down roughly 25 per cent on the session after pre-earnings disclosures, served as a live illustration. Prehn suggested that even modest reductions in capital expenditure could expose the fragility of circular financing arrangements. Aggregate profit expectations were elevated, he noted, yet reported earnings had been broadly flat that year.

Co-host Mike Butler reinforced the point from a trading perspective. He observed that rising capital expenditure reduces a company's capacity to absorb adverse shocks. The more leverage a company assumes, the less room it has to weather a downturn, Butler noted.

Prehn also raised concentration risk at the portfolio level. He argued that holders of index trackers, sector vehicles and individual technology stocks simultaneously can end up with overlapping exposure to the same trade. A single adverse move in technology could therefore ripple through an apparently diversified portfolio. He suggested that sectors such as insurance and pipelines offered genuine diversification away from technology. Position sizing, he said, remained the most reliable defence.