Man Group has warned that rapidly expanding debt issuance tied to artificial intelligence infrastructure could be creating conditions reminiscent of previous market bubbles, as companies race to finance AI-related growth, according to a report by Bloomberg.

The report cites executives including Sriram Reddy, the firm’s head of client portfolio management, as cuyatioing in a note yesterday that investor enthusiasm surrounding AI has led to increasingly aggressive financing activity, or .

“The enthusiasm for the sector has encouraged significant overreach,” the executives wrote, highlighting particular concern over issuance in high-yield bond and leveraged loan markets, where many issuers continue to generate negative free cash flow.

According to the hedge fund manager, the scale of debt financing linked to AI infrastructure is set to exceed levels seen during the dot-com era. Citing estimates from Morgan Stanley, Man Group said issuance connected to AI and hyperscale data centre development could total around $400bn in investment-grade bonds, alongside a further $65bn in high-yield debt.

If realised, AI-related issuance could account for close to one-fifth of overall bond market supply, the note said.

By comparison, debt issuance from internet and technology companies reached a peak of approximately $85bn in 2001, representing an average 14.5% share of total issuance across 2000 and 2001.

Man Group said investors should remain mindful of the risks associated with the pace of AI infrastructure expansion, particularly given the uncertainty surrounding future returns on investment.

The firm noted that questions remain over the long-term profitability of emerging cloud providers and data centre operators lower down the credit spectrum. It also warned that rising leverage and growing capital requirements could add further pressure to borrowers in the sector.