The market is experiencing a moment of effervescence: this year there have been multiple headlines about cryptoassets, capital expenditures (capex) related to artificial intelligence (AI), and the opportunities offered by private asset markets. But are any of these vectors currently in bubble territory?
Pilar Gómez-Bravo, co-CIO of fixed income at MFS Investment Management, has decades of experience that allow her to identify where cracks in the system may be appearing—ones investors should keep an eye on. During a recent presentation in Madrid, she emphasized that there is currently no red alert, though she encouraged investors to “make a list of the things that bother us and that we don’t fully understand,” stressing the importance of expectations versus the actual reach of these three market vectors, especially in regard to AI.
Gómez-Bravo offered several keys for identifying bubbles. First, she pointed out the importance of determining whether it is a productive bubble—one that leaves usable assets behind after it bursts—or not. She gave the example of the dot-com bubble, which left behind infrastructure like fiber optic cables that continued to be used for years. In contrast, with assets like gold or cryptocurrencies, price collapses leave behind few if any reusable elements. Therefore, another essential point in analyzing a bubble is evaluating whether there will be winners after it bursts.
How to Assess AI From a Fixed Income Investor’s Perspective
The key to understanding whether there is a bubble around AI—and whether it might burst soon—Gómez-Bravo explained, lies in the ability of companies directly linked to this trend to monetize their capex investments. In her view, current multiples have not yet reached the levels seen during the dot-com bubble.
According to her estimates, it would take $1 trillion in profits to justify current investment levels. Additionally, many MFS clients expect to see signs of monetization in the next 18 to 24 months.
“The U.S. consumer doesn’t want to pay for LLMs (large language models), and token prices are falling. That’s why the strategy is for companies to pay for their use,” she explained. However, profitability would come more from reducing labor costs—through layoffs or lower hiring—than from a direct increase in revenue.
She also warned of the social risks of AI, especially due to the high energy consumption of data centers, which raises electricity costs and impacts inflation. “There is a risk of a populist backlash, as the heavy electricity use by these centers affects the utility bills of nearby residents and could spark protests against the construction of new facilities.”
The Role of Private Markets in Financing AI
For Gómez-Bravo, the concern is not so much about high valuations or increased investment in AI-related infrastructure, but rather the emergence of a closed ecosystem in which the Magnificent Seven finance operations among themselves. As an example, she noted that OpenAI, still unlisted, has announced $500 billion in capex despite remaining in the red.
“AI growth is largely being financed with private debt,” she explained, noting that only half of AI investment is funded by cash flows. Currently, AI accounts for more than 14% of investment-grade (IG) debt.
The expert’s warning is clear: the bubble could take on a systemic character if the traditional financial system starts participating. “When banks begin financing private debt operations, the risk will increase.” She mentioned examples like J.P. Morgan and UBS, both of which have exposure to failed private deals such as First Brands, which recently defaulted.
“It will be crucial to monitor the correlation between bank balance sheets and the private market,” she emphasized, pointing especially to U.S. regional banks. “Private markets are neither good nor bad, but they involve systemic risks, lack regulation, and are not always transparent.”
She also flagged the rise in venture capital funding rounds conducted off-balance sheet—a sign of fragility that may take time to surface. She further warned about a new accounting issue: data centers are amortized over six years, while the chips that power them only have a two-year lifespan.
Cryptocurrencies and Stablecoins
Although she clarified that she is not a specialist on the subject, Gómez-Bravo shared reflections on the rise of cryptocurrencies, particularly stablecoins (digital currencies backed by dollars), whose access to retail investors has expanded following recent regulations.
The growth of stablecoins, she noted, implies captive demand for Treasuries, and the U.S. government has shown its intent to support this trend through new debt issuance. The only obstacle, she warned, could be the independence of the Fed, as its high-rate policy puts pressure on the short end of the curve—just as the U.S. Treasury increasingly relies on short-term issuance.
“For now, the Fed’s policy is not a problem, but in the future the rise of stablecoins could become a threat to Treasuries, which act as the collateral of the global financial system,” Gómez-Bravo concluded.
