▲AI PRISM* Customized Economic Briefing
*Editor's Note: 'AI PRISM' (Personalized Report & Insight Summarizing Media) is an "AI-based personalized news recommendation and summary service" developed with support from the Korea Press Foundation. It selects and provides six customized news items by reader type.
[Key Issue Briefing]
■ Distrust of AI Long-Term Bonds: As Big Tech pours out record amounts of corporate bonds this year to fund AI infrastructure investment, distrust of long-term issues in the bond market is deepening in an unusual way. SpaceX, rated BBB, has seen the credit spread on its 30-year bonds (the interest rate gap between government and corporate bonds) exceed even the average for BB, a below-investment-grade rating, in an inversion. Industry experts are raising skepticism about the long-term profitability of AI capital expenditure.
■ Dealers' Record Net Selling: Wall Street primary dealers, specialists in government bonds, have turned to net-selling positions in corporate bonds for the first time since related statistics began in 1998, flashing an unusual warning signal to the market. Amid geopolitical instability from the Iran war and a high-interest-rate environment, credit spreads have approached their lowest levels in decades, sharply reducing incentives to buy. Dealers are showing a clear trend of cutting inventory, centered on medium- and long-term bonds.
■ Power Grid Supply Crisis: With surging demand from artificial intelligence data centers and demand to replace aging U.S. power grids rising simultaneously, supply bottlenecks in key grid equipment such as transformers are spreading beyond semiconductors to power infrastructure as a whole. Producers of subsea extra-high-voltage cables are booked with orders through as late as 2029, and lead times for some large transformers reach up to four years, prompting the power industry to pre-order equipment five years before starting new projects.
[Global Investor News of Interest]
1. 'BBB' SpaceX Treated Worse Than BB Grade... 30-Year Spread Tops 2 Percentage Points
- Key Summary: As corporate bond issuance for Big Tech AI infrastructure investment reached 570 billion dollars this year, more than double last year's level, distrust of SpaceX long-term bonds in the bond market has soared to an unusual level. The yield on SpaceX's 30-year bonds, rated BBB, rose from 6.7% to 7.3% within two weeks of issuance, and its credit spread topped 2 percentage points, an unusual situation exceeding even the average for BB, a below-investment-grade rating (1.55 percentage points). Mariya Entina, a portfolio manager at DoubleLine, said she is "skeptical about the long-term profitability of AI capital expenditure," and Pramod Atluri, a manager at Capital Group, assessed that "technology is evolving so fast that long-term issues are a riskier proposition." Meanwhile, in a 25 billion dollar bond issued by Amazon on the 7th, orders for the 5-year issue were 20% higher than for the 30-year, showing a preference for short-term bonds spreading across the AI bond market as a whole.
2. Wall Street Dealers Play It Safe... First-Ever Net Selling of Corporate Bonds
- Key Summary: The corporate bond inventory of Wall Street primary dealers, specialists in government bonds, turned negative for the first time since related statistics began in 1998, recording a net-selling position of 4 billion dollars (about 6 trillion won). This is a sharp decline compared with the average inventory of 16 billion dollars (about 24 trillion won) held in 2017, which Wall Street interprets as defensive betting amid geopolitical instability from the Iran war and a high-interest-rate environment. This week, corporate bond yields stood at just 0.74 percentage points above U.S. Treasuries on average, bringing credit spreads close to their lowest level in decades. As of the end of last month, dealers net-sold 13.7 billion dollars in corporate bonds maturing in five years or more, while net-buying 9.66 billion dollars in short-term corporate bonds, showing a stark polarization between short- and long-term issues. Some also see room for corporate bond investment demand to rebound if the Federal Reserve (Fed) halts rate hikes contrary to expectations.
- Key Summary: As surging demand from artificial intelligence data centers combines with demand to replace aging U.S. power grids, a supply shortage is deepening, with lead times for key grid equipment such as transformers and circuit breakers rising sharply from the previous one to two years to three to four years. According to consulting firm Wood Mackenzie, U.S. demand for generator step-up transformers surged 274% from 2019 to 2025, and lead times exceeded 160 weeks (about three years and one month) in the first quarter of this year, up from 143 weeks in 2024, while subsea extra-high-voltage cable producers Prysmian, Nexans and NKT are fully booked with orders through as late as 2029. As a result, Roseville Electric Utility in California, U.S., said it is ordering large substation transformers five years before projects begin, and Brookfield expanded its financing support for Bloom Energy's fuel cell power generation project fivefold, from the previous 5 billion dollars (about 7.5 trillion won) to 25 billion dollars (about 34.6 trillion won). Wood Mackenzie forecasts U.S. data center power capacity will reach 110 gigawatts (GW) in 2030, 4.6 times the current roughly 24GW, and Allianz Research predicts that the shortage rate for key power equipment will reach about 30%, so about half of the roughly 12GW of data center capacity planned in the U.S. this year will be delayed or canceled.
[Global Investor Reference News]
4. "HBM4 Prices to Double Next Year... Samsung-SK Hynix Bargaining Power to Continue"
- Key Summary: With high-bandwidth memory (HBM) demand surging ahead of shipments of Nvidia's next-generation AI platform, Taiwan's DigiTimes, citing multiple industry sources, forecast that HBM4 prices will jump from about 2 dollars per gigabit (Gb) in the second half of this year to more than 4 to 5 dollars next year. HBM manufacturing consumes about three times the wafer production capacity of DDR5 (Double Data Rate 5), a general-purpose DRAM, and HBM4's production cycle of four to six months is longer than DDR5's (three to 3.5 months) with low initial yields, creating strong upward price pressure. Major AI customers are securing volumes in advance by signing three- to five-year long-term agreements (LTAs) with Samsung Electronics (005930.KS), SK hynix (000660.KS) and Micron to prepare for supply shortages, and the industry estimates this volume will tie up 20% to 30% of general-purpose DRAM production capacity. In addition, as DDR5 profit margins exceeded 80% for some suppliers, Samsung Electronics and SK hynix are also reallocating some production capacity to DDR5, further deepening the HBM supply shortage. DigiTimes assessed that "customers who fail to secure long-term contracts could face the greatest risk."
5. Aggressive on the Surface, Signaling Dialogue Behind the Scenes... Iran's Two Faces
- Key Summary: As the U.S. and Iran exchange attacks, Iran has revealed a dual approach, strongly criticizing the U.S. in public while sounding out its willingness for dialogue through informal channels. After Iran's Islamic Revolutionary Guard Corps (IRGC) struck U.S. command-and-control centers and aircraft carrier refueling facilities in Jordan, Kuwait and Bahrain, U.S. Central Command immediately hit about 140 military targets inside Iran, including missile and drone bases, using fighter jets, drones and precision-guided weapons. U.S. Defense Secretary Pete Hegseth warned of consequences, saying "Iran made the wrong choice," and The Wall Street Journal (WSJ) reported that U.S. President Donald Trump believes the possibility of a nuclear deal is diminishing. Meanwhile, Oman proposed a mediation plan to Iran that would open both routes through the Strait of Hormuz—free navigation on the southern route and prior approval on the northern route passing through Iranian territorial waters—and a Qatari delegation also attended the negotiations as the search for a diplomatic solution continued.
6. "Rate Hike This Month Certain... One More Likely in Second Half"
- Key Summary: According to the results of the "SE Monetary Policy Committee Survey" conducted by Seoul Economic Daily among 20 domestic economics and business professors and financial experts, respondents...
