AI Boom Fuels Utility Debt, Risks Bubble Burst
Update: 2025-12-20
Description
AI Boom Fuels Utility Debt Surge, Raising Risks for InvestorsThe artificial intelligence boom is driving US economic growth, with utilities borrowing heavily to build data centers and strengthen the power grid. JPMorgan Chase predicts an eight percent increase in utility bond sales next year, potentially lowering prices due to wider spreads. Despite regulation ensuring cost recovery, the surge in debt introduces risk. Investors worry about an AI bubble bursting and political backlash over rising electricity prices. Experts advise sticking to bonds from operating companies, secured by plants and territories, rather than riskier holding companies. Demand remains strong, with utilities investing beyond their cash flow, creating both opportunities and challenges.
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