Credit cracks: PIMCO warns AI debt to make investors pickier

Let's not get carried away, but something's off. PIMCO, an investment giant, sounds the alarm: the credit market is showing its first signs of weakness. Lotfi Karoui, PIMCO's multi-asset credit strategist, explained on Bloomberg Open Interest that the weakest borrowers are starting to struggle, and that's a red flag. While many look to AI as the savior of every sector, in the financial world, some see shadows. Karoui emphasizes how the current situation, with not-so-friendly interest rates, is putting pressure on those already in the red. Simply put, money isn't raining from the sky like it used to, and banks are becoming more cautious.

Ah, artificial intelligence! The very thing promised to solve all our problems now risks creating new ones in the credit world. PIMCO analyst Lotfi Karoui predicts a new wave of debt generated by AI companies, ready to invest crazy amounts to keep up. This means more demand for capital, but not for everyone. Investors, in fact, will have to become much better at choosing where to put their money. It won't be enough to just bet on the "winning horse" of AI, because the risk is high and the stakes are too. It'll be a bit like finding a needle in a haystack, but with the needle possibly dissolving at any moment.

In such a context, the strategy changes. PIMCO suggests that capital protection and deal structure become absolute priorities for investors. It's no longer about guessing who the next AI Google will be, but about making sure you don't lose your shirt if things go south. For us ordinary folks, this means that even if we don't invest directly in bonds, the financial market's mood can affect everything. Banks might become even more selective in lending, and the cost of money might not fall so easily. It's a bit like when the mechanic tells you the car has a "funny noise": maybe it's nothing, but it's better to keep an eye on it.