AI Valuation Slumps as Investors Fear Debt Bubble

Investors are expressing growing concern over the debt-fueled spending supporting the global artificial intelligence buildout, resulting in a volatile tech trade. OpenAI has reduced its valuation target to $1.25 trillion from $1.4 trillion and cut its funding goal by $10 billion after failing to raise half of its initial $30 billion target.

Credit and regulatory warnings have further strained market confidence. S&P Global Ratings downgraded the credit outlook for Meta Platforms Incorporated, citing a limited ability to monetize AI investments compared to its peers. Alphabet Inc. introduced new warnings in SEC filings, using the word "catastrophic" for the first time to describe potential security and societal incidents resulting from rogue AI models.

Market participants are now monitoring the expected initial public offering of Anthropic. The AI start-up has warned of existential risks to humanity in its S-1 paperwork, and its IPO is viewed as a potential catalyst to defuse concerns regarding an AI bubble.