Rockefeller’s Ruchir Sharma on AI: Biggest boom of our times, but is possibly a market bubble

Summary

Ruchir Sharma warns that the AI boom has become a possible full-scale market bubble and that higher interest rates are the classic bubble breaker. He argues this cycle's excesses are on the US government balance sheet, with large fiscal deficits and a rising interest burden making a 10-year Treasury break above 5% a potential regime-shift trigger for broader markets. He also expects credit stress to emerge first in weaker, riskier borrowers.

• Ruchir Sharma discusses his FT column on why America's debt binge is starting to matter.
• He views the AI boom as the biggest boom of our times but possibly a full-scale financial market bubble.
• He says bubbles historically end with higher interest rates, and the 10-year yield breaching 5% could break the AI bubble.
• He highlights that this cycle's leverage is concentrated on the US government balance sheet rather than corporates or households.
• He notes the US interest burden is approaching $1 trillion, more than 3% of GDP and the highest among major countries.
• He argues fiscal deficits above 6% of GDP, and above 7% with state and off-balance-sheet items, are a problem too large for the Treasury Secretary to solve.
• He expects stress to start with weaker links such as riskier triple-C rated borrowers before moving up the credit curve.