DoubleLine's Cohen Warns of AI Bubble Coming to Credit

Summary

Robert Cohen, DoubleLine's director of global developed credit, warns that an AI bubble in credit is coming, though not yet fully materialized. He advises focusing on strong balance sheets and specifically highlights Oracle as a risky credit due to its high-yield profile. He also cautions against speculative growth-dependent credits that may emerge.

• Cohen believes the probability of an AI credit bubble is 100% based on historical patterns.
• He distinguishes between equity bubbles (valuations) and credit bubbles (inability to repay debt).
• Current credit markets are not yet at bubble levels, but speculative credits are expected to appear.
• Cohen recommends holding credits with strong balance sheets that can survive a cycle.
• He singles out Oracle as a credit concern due to its high-yield-like spreads.
• Hyperscalers broadly may survive, but Cohen does not name specific winners.
• The speaker draws parallels to the dot-com bubble and energy credit defaults.