As we enter 2026, credit markets are undergoing a meaningful regime shift. While economic growth in the US remains sufficient to support most corporate and consumer fundamentals, the balance of power in credit is changing. After years defined by scarcity, markets are moving into a higher-supply environment, driven primarily by AI-related investment and a revival in M&A, setting the stage for greater dispersion, rising selectivity, and improved opportunities for buyers of credit.
Key themes shaping the credit landscape in 2026:
- AI is now the dominant source of incremental credit supply.
What began as a self-funded capex cycle has evolved into a broad-based financing event. Hyperscaler investment has already tripled since 2023, with cumulative AI-related spending expected to exceed $2.7 trillion from 2025 to 2029. As internal cash flows fall short, debt financing across IG, private credit, project finance, CRE, and ABS will increasingly shape issuance patterns and market correlations. - AI issuance is increasing concentration and correlation risk.
AI-related exposure is becoming pervasive across portfolios. Apparent diversification across issuers and sectors increasingly reflects a single macro bet on AI, elevating correlation risk. This dynamic heightens the value of diversification into areas structurally insulated from the AI arms race, including European private credit and sports financing. - M&A is returning at scale, reinforcing supply dynamics.
Lower financing costs, workable valuations, abundant private equity dry powder, and a more supportive policy backdrop are driving a resurgence in deal activity. Larger transactions are tapping multiple segments of the credit markets simultaneously, further expanding supply across both IG and leveraged finance. - The cycle is defined by dispersion, not distress.
Economic growth is narrowing rather than weakening, concentrating among higher-income consumers and large, AI-exposed corporates. This K-shaped environment is driving widening dispersion across credit markets, not forced selling or systemic stress. In this cycle, selectivity is paramount, and dispersion is the mechanism through which attractive opportunities emerge.
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