Oct 7, 2026 · 31 min
AI spending tests markets as infrastructure and rates reset
Bloomberg Surveillance TV: October 7th, 2026
The episode connects AI’s earnings boost to the financing, energy, grid, and interest-rate constraints that could determine whether the investment cycle endures.
- 1Narrow technology leadership can persist until higher bond yields make fixed income a stronger equity alternative.
- 2AI capital spending is supporting earnings, but a slowdown could expose weak returns or ease bubble concerns.
- 3Underinvestment is colliding with AI-driven demand as infrastructure investors confront technology obsolescence and persistently higher rates.
Don't miss
Mark Cabana explains why markets may be underestimating persistently higher rates and where those costs are beginning to reach the economy.
The brief
Alicia Levine argues that a small group of technology stocks can keep leading, but rising bond yields could eventually give investors a credible alternative.
AI capital spending is lifting S&P 500 earnings while raising bubble concerns; Levine says a moderate slowdown might cool excesses without ending the trade.
Olivia Wassenaar describes Apollo’s financing across chips, power, grids, gas, and industrial infrastructure as AI demand collides with years of underinvestment.
The infrastructure bet carries two risks at once: new technology could make assets obsolete, while inflation and higher rates could reshape returns and financing.
Mark Cabana says markets are reassessing the neutral interest rate, with higher borrowing costs already reaching credit, housing, autos, European bonds, and consumers.
The episode’s central tension is whether AI’s apparent rate resilience can withstand a Federal Reserve operating through an economy where financing costs increasingly bite.
What was said on this episode
11 statements · 3 positive · 5 negative · 2 mixed · 1 neutral
Small-cap stocks are approximately 8% below their recent high.
“So small caps are about 8% below the high.”
Listen at 3:18
Narrow market leadership can continue for a long time.
“I think it continued for a long time.”
Listen at 3:51
Short- to intermediate-duration bonds are currently safer for clients.
“We're in the short term to intermediate for our clients. It's been an okay place to be. It's a safer place to be.”
Listen at 5:33
Bond yields could readily reach 5.5%.
“I think we can easily see yields getting to 5.5% here.”
Listen at 6:06
At 5.5% yields, bonds become competitive with stocks.
“And I think at that point, it becomes competition.”
Listen at 6:20
AI-related capital spending is funding S&P 500 earnings.
“That CapEx spend is funding the earnings of the S&P.”
Listen at 6:59
A slowdown in data-center construction could stop the technology rally.
“I think what stops it really is the slowdown in the data center build-out.”
Listen at 7:22
Moderating AI infrastructure expansion could extend the AI investment trade.
“if you slow it down a little bit, that actually helps the longevity of the trade.”
Listen at 8:16
A slowdown would likely cause a viable correction without a recession.
“That looks like a correction, which will be eminently viable because we don't see a recession here. We think the economy is really strong.”
Listen at 8:36
Current infrastructure conditions resemble the underinvestment-driven energy cycle of 2003–2008.
“You're seeing some real parallels to that today.”
Listen at 13:04
The U.S. 10-year yield has risen approximately 115 basis points year to date.
“the 10-year is up about 115 basis points.”
Listen at 22:25
Statements are attributed to the speaker as said on the episode and reflect their view at the time, not PodLume's. They are not advice.