Investment giant BlackRock has changed its policy on long-term U.S. Treasuries, saying a surge in spending on artificial intelligence could make borrowing more expensive.
The firm’s research division announced Tuesday that it is now bearish on these bonds, after previously being bearish. The outlook covers the next six to 12 months.
Here’s the problem. Technology companies are preparing to borrow hundreds of billions of dollars to pay for AI projects. Although their balance sheets look strong, this new debt piles on top of the more than $38 trillion already owed by the U.S. government, as Cryptopolitan previously reported.
Increased leverage creates vulnerabilities
“Upward pressure on interest rates is likely to continue due to increased borrowing across the public and private sectors,” BlackRock Investment Institute said in its 2026 outlook report.
The institute gathered input from senior investment managers from the world’s largest asset management firms. They see the warning signs.
“Structurally higher costs of capital will increase the cost of AI-related investments, with implications for the broader economy,” the report said. There’s also the problem that more debt makes things more vulnerable. The system would be vulnerable to “shocks such as spikes in bond yields related to fiscal concerns or policy tensions between inflation control and debt service costs.”
AI investment continues to drive stock optimism
Still, the market price of BlackRock’s U.S. stocks has not worsened. The company believes AI investments will continue to push the stock higher next year. Increased revenue from AI should boost the overall economy, but not all companies will benefit equally.
“Entirely new revenue streams generated by AI are likely to be developed. How those revenues are distributed is likely to evolve, but we do not yet know how. Finding winners will be an aggressive investment story,” the institute said.
The report acknowledges that AI could eventually help government finances through increased productivity and more tax inflows, but that will take time.
Big tech companies like Oracle, Meta, and Alphabet have already issued significant debt this year to fund AI infrastructure. The wave of borrowing comes as spending on AI is fundamental to U.S. economic growth.
BlackRock also took a more negative view of Japanese government bonds, pointing to the possibility that interest rates will rise in the future and more bonds will enter the market.
There was one bright spot. The company accepted debt from developing countries, turning its outlook from negative to positive. That’s thanks to a decline in new bonds and healthier government finances in these regions.