Fitch warns AI boom and U.S.-Iran conflict pose major global credit risks
With AI-related capital expenditure projected to reach $700 billion and bond issuance surging, Fitch warns that a market correction could trigger widespread macroeconomic implications.
Fitch Ratings has issued a stark warning in its third-quarter Global Risk Outlook, identifying the rapid expansion of the artificial intelligence sector as a significant source of global credit risk. The agency cautioned that soaring technology valuations and unprecedented capital expenditure may be outpacing uncertain future returns, creating a vulnerability for credit markets that could be exacerbated by a sharp market correction.
The report highlights that the U.S. S&P 500’s cyclically adjusted price-to-earnings ratio has climbed to levels comparable to the late-1990s dotcom boom. This valuation surge coincides with a 26% increase in U.S. corporate bond issuance during the first half of 2026, largely driven by AI-related fundraising. Major technology firms, including Amazon, Alphabet, Nvidia, Meta, Oracle, and SpaceX, collectively issued $182 billion in investment-grade bonds to fuel their expansion.
Capital expenditure for Alphabet, Amazon, Meta, and Microsoft is projected to increase by more than 75% this year, reaching $700 billion. Fitch estimated that this booming IT investment directly contributed 1.4 percentage points to first-quarter U.S. GDP growth. However, the agency noted that uncertainty surrounding future AI revenues, regulation, competition, and labour-market disruption could trigger a prolonged correction with widespread macroeconomic implications.
Geopolitical tensions remain the other dominant short-term risk, particularly following renewed fighting between the U.S. and Iran and the subsequent closure of the Strait of Hormuz. Fitch forecasts global growth to slow to 2.4% in 2026 and predicts U.S. inflation will end the year at 3.7%, influenced by higher energy prices. The agency also flagged a strong El Niño weather pattern as an emerging credit risk due to the likelihood of droughts, floods, and severe storms.
The ratings agency warned that these factors could compound inflationary pressures, particularly affecting highly indebted countries with junk-rated debt. In Latin America, where fertiliser and diesel account for a substantial portion of agricultural input costs, higher prices and weaker harvests could squeeze agribusiness margins and strain transport sectors including ports and railways.
