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An AI label alone no longer wins lenders, JPMorgan says

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An AI label alone no longer wins lenders, JPMorgan says

An AI label alone doesn't secure funding as lenders now weigh a firm’s business and financial viability, according to JPMorgan.

“The AI label alone is no longer enough to reassure lenders. Companies must show that they can finance investment, service their debt and eventually turn spending into cash flow,” Justin Biemann, global investment strategist at J.P. Morgan Private Bank, said in a report published Oct. 23.

Elon Musk issued a similar warning on Sunday, saying debt funding is drying up for AI neoclouds, firms whose revenue depends almost entirely on data centers.

That matters for crypto. AI has been one of the most potent narratives driving risk-taking across financial markets, bitcoin included. Bitcoin and Nvidia both bottomed within weeks of ChatGPT’s debut in late 2022 and have rallied significantly since. Instability in AI could therefore spill over into crypto.

These warnings come as markets grow uneasy over whether AI’s promise will show up on balance sheets. The tech-heavy Nasdaq has slid 6.7% to 29,263 from 31,360 since Oct. 6, with AI-linked firms such as Nvidia and Oracle falling more than the index.

The stress is showing up in credit markets too. The cost of insuring against defaults on the debt of several AI-linked firms has hit record levels . This insurance is called a credit default swap (CDS). The buyer pays a yearly premium, and if the borrower goes bankrupt or fails to pay, the buyer gets a large payout. The premium, also known as the spread, is quoted in basis points.


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