Andromeda Capital Warns of AI Credit Cycle Risks

Andromeda Capital Management released a report analyzing risks within the current AI credit cycle, arguing that existing financing structures disproportionately favor equity holders over debt providers. The firm describes the current market as a "heads I win, tails you lose" setup, noting that credit investors are accepting record-tight spreads and capped upside while facing uncertain returns on their capital.

The report warns that the multi-trillion-dollar private credit market is heavily concentrated in technology and Software-as-a-Service. This concentration is shifting financial risks toward private equity-owned vehicles, life insurers, and circular financing structures. Andromeda Capital Management suggests that these systemic complexities mirror the financial structures that existed prior to the Global Financial Crisis.