The AI buildout is running into the credit wall
Pablo Salame, 60, says the AI boom's appetite for capital is slamming into a lending system still figuring out how to shed risk. In a rare interview, he framed it as a coming truce between equity investors chasing big payoffs and creditors focused on repayment. "The credit market is getting jammed right now because it hasn't figured out a good way to offload those risks yet," he said. "AI's rising tide will sink some boats, and it's a wavy tide."
He helps steer Citadel's $77 billion alongside founder Ken Griffin and is blunt about the strain ahead. "Credit is not done resetting," Salame said. "It's going to be very tested." Early red flags include managers shying away from AI-linked leverage as yields demanded on junk-rated borrowing have jumped. On Sunday, Elon Musk cautioned that if debt markets are choked off, more than 200 neoclouds could face "guppy-level" death and consolidation.
From credit light to capex heavy
With business leaders projecting trillions of dollars of capital needs, Salame says the AI arms race has become a financing arms race. "A huge part of the market-cap growth was credit light," he said. "Now we are moving into a period of growth that is capex based." He added, "Reduce that capital expenditure and that means the growth assumed in equity markets is just wrong," noting that this echoed remarks he delivered at an investor gathering held behind closed doors last week. The destination, in his view: "It's not a crisis, it's a reconciliation."
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Griffin put a sharper point on the backdrop last week, saying bubbles are "almost certainly" starting to emerge in AI. "Any radical transformation of our economy is generally intertwined with a bubble," he said. "These bubbles, if we want to use that word, often coincide with these giant technological transformations."
Where the financing strain is already showing
Meta Platforms raised the stakes with an even bigger AI push, saying its future spending commitments are rising to $825 billion, and it rolled out a new share class that may be tapped to fund acquisitions and other expenses. That highlights how far reliance on debt alone can stretch. Earlier this month, the Wall Street Journal reported that Anthropic could spend $750 billion on more computing capacity over the coming years, and its planned public listing could serve as a test of the AI rally's resilience.
Salame says the market's plumbing is not built for limitless AI stories. "The credit market isn't structured to raise hundreds of billions of story debt," he said. "Equity investors can earn multiples of their money. Lenders are earning a spread."
The investor angle
In 2019, Salame came to Citadel to head its credit business, and in 2022 he became co-CIO alongside the 58-year-old Griffin, after roughly a decade helping lead Goldman Sachs's trading division. Citadel's assets now total $77 billion; in the year before he joined, they were $30 billion. That perspective shapes his read on the next phase: "There is so much more capital that needs to be deployed that credit investors will get the chance to be choosy." The lowest rated borrowings are already being picked over, and he expects the market to tighten terms on other junk-rated debt with better grades. The market, he said, "expects credit investors to partly underwrite the rate of technological change," even as visibility far into the future is limited. His take on the long end sums it up: "I think thirty-year credit spreads are a little fanciful."
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