AI bubble risks spread beyond Wall Street as debt concerns grow

The AI bubble is beginning to transfer its risks beyond Wall Street, as discussions of bailouts emerge amid growing debt and private credit exposure. The correction in AI-related stocks has deepened, raising concerns about the sustainability of massive investments. On November 5, semiconductor and AI-linked stocks extended a correction that began in October, with the Philadelphia Semiconductor Index (SOX) falling nearly 11%, its steepest drop since March 2020. Companies like AMD, Micron, Dell, and Marvell lost over 10% in some trading sessions, while Nvidia and Broadcom faced heavy selling pressure. The International Monetary Fund has identified $650 billion in debt across 14 major AI-linked operations. Meanwhile, some Democratic Party members propose allowing AI companies to fail rather than receive bailouts, as doubts grow over whether multibillion-dollar investments will yield sufficient returns.