The ripple effects of AI splurging

Summary

Podcast Summary: Marketplace Morning Report

Episode: The ripple effects of AI splurging
Date: February 25, 2026
Host: David Brancaccio (Marketplace)
Duration: ~10 minutes

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Overview

This episode explores the far-reaching economic effects of massive investments in artificial intelligence (AI), particularly by big tech companies. Host David Brancaccio discusses recent volatility in global financial markets driven by AI expectations, interviews experts on investor psychology, touches on how AI may reshape labor and traditional economic benchmarks, and delves into the knock-on effects in corporate borrowing and interest rates.

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Key Discussion Points & Insights

1. Whiplash in Financial Markets Driven by AI News

• David Brancaccio opens with how headlines about AI investment cause dramatic market moves. Monday saw pessimism that AI could "ruin swaths of the economy," causing a selloff, while optimism fueled by Meta’s $100 billion AI chip deal with AMD reversed those losses on Tuesday, boosting indices worldwide.
  • “[AI] turns on a dime these days.” (Brancaccio, 01:28)

Notable Quote

• David Brancaccio: “Can I say it this way? What is with you people? I mean, it turns on a dime these days.” (01:36)

2. Investor Uncertainty and AI’s Profit Horizon

• Susan Schmidt (Portfolio Manager, Exchange Capital Resources) explains why investors are jittery:
  • The enormous scale of AI investments makes it hard to assess when (or if) they'll pay off.
  • Markets expect perfection, especially from companies like Nvidia, and any hint of margin pressure could spook investors.
  • “We just have no idea how soon companies are going to realize operating profitability…” (Schmidt, 01:46)

Notable Quote

• Susan Schmidt: “That's because it's such an unknown. We just have no idea how soon companies are going to realize operating profitability, operating improvements from this AI investment. These are big numbers. Investors just can't figure out what to make with it.” (01:46)

3. The Nvidia Effect & “Priced for Perfection”

• Nvidia's financial results are closely watched, setting the tone for the AI industry. Schmidt notes Nvidia has a track record of "under-promising and over-delivering," but warns that if it falls short or alludes to declining profit margins, it could trigger another sell-off.
  • “If Nvidia misses estimates or talks about margin pressure, I think investors have the potential to get very nervous…” (Schmidt, 02:35)

Notable Quote

• Susan Schmidt: “It really is priced for perfection… If Nvidia misses estimates or talks about margin pressure, I think investors have the potential to get very nervous and we could see another swing in AI stocks tomorrow.” (02:23 – 02:35)

4. AI's Potential to Reshape Labor and Economic Benchmarks

• Soundbite: Clip from an interview by Kai Ryssdal with Atlanta Fed President Rafael Bostic, exploring how widespread AI adoption may force a rethink of standard economic metrics.
  • Bostic notes if AI allows companies to do more with fewer people, “all of our benchmarks are going to have to change”—including how we interpret jobs numbers and unemployment rates.
  • “That could be a structural change.” (Bostic, 03:31)

Notable Quote

• Rafael Bostic: “If [AI] winds up penetrating through the entire economy, all of our benchmarks are going to have to change. Like how we think about what a good jobs number is or what unemployment rate that’s reasonable should be, because the same number is sending a very different signal.” (03:33 – 04:08)

5. The AI Building Boom: Massive Corporate Bond Issuance

• Justin Ho (Marketplace correspondent) reports on the cascade of debt financing due to AI infrastructure spending:
  • Companies expected to spend $50 billion/month building data centers for AI.
  • To fund this, tech firms are issuing record levels of corporate bonds.
  • This increased supply could push bond yields up, potentially raising costs of borrowing for consumers (mortgages, car loans, etc.).
  • “There’s a glut of supply coming to market and demand needs to keep up…” (Lawrence Gillum, 08:34)

Segment Breakdown with Timestamps

• [05:50] Introduction of $50 billion/month data center spend and impact on corporate bond market
• [06:12] Lawrence Gillum explains low risk premium for big tech bonds
• [07:00] Ana Chieslock discusses substitution between corporates and Treasuries
• [07:20] How shifting demand for bonds could raise both corporate and Treasury yields
• [07:26] Higher bond yields could make borrowing more expensive broadly
• [08:06] Zachary Griffiths: If growth slows, government bond yields could fall
• [08:16] Lawrence Gillum: Treasury also issuing trillions, creating supply/demand tension

Notable Quotes

• Lawrence Gillum: “There’s a glut of supply coming to market and demand needs to keep up with that supply. Otherwise you’re going to have higher yields, especially… if companies keep selling trillions of dollars of bonds.” (08:34 – 08:43)
• Ana Chieslock: “You can think about, to some extent, the corporates being substitutes for Treasuries, especially those that have a very high quality.” (07:00 – 07:10)
• Ana Chieslock: “Then you can imagine that both yields on Treasuries and on corporates move up.” (07:20 – 07:26)

6. Macro-Level Impacts: Potential for Broader Rate Rises

• Increased corporate bond issuance could even affect government borrowing, as investors may favor high-quality corporate bonds over Treasuries, potentially forcing up interest rates on Treasury debt as well—making borrowing more expensive across the board.

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Memorable Moments

• “What is with you people? I mean, it turns on a dime these days.” – Brancaccio’s lighthearted jab at market volatility (01:36)
• “All of our benchmarks are going to have to change.” – Bostic reflecting on AI’s transformative, structural economic impact (03:36)
• The figure: $50 billion per month expected AI data center spending—underscoring the scale of this investment wave (05:50)
• The idea that record corporate bond issuance could have ripple effects, possibly impacting mortgage rates and all sorts of other borrowing (07:26 – 08:43)

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Conclusion

This tightly-packed episode highlights the widespread, unpredictable consequences of monumental investments in artificial intelligence—not just in stock prices, but throughout labor markets, traditional economic metrics, and global capital markets. Listeners gain an understanding of how uncertainty about AI profitability fuels market swings, the scale of infrastructure spending, and how these shifts might make everything from government borrowing to consumer loans more expensive.

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For Further Exploration:

• Special segment promoted at the end: “Building Tomorrow” podcast exploring the future of American housing amid economic, environmental, and technological change.

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End of Summary

Transcript

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[David Brancaccio]

Indeed AI Driven moodiness on financial markets I'm David Brancaccio in Los Angeles. Monday the stock market consensus was that artificial intelligence will ruin swaths of the economy and we got a big sell off. Then came Tuesday, where a $100 billion meta Facebook deal to buy AI chips from Advanced Micro Devices drove a wave of tech optimism that boosted the NASDAQ here 1% in Japan's Nikkei index by more 2% today. Now pick a day and market players pick one poll or another on AI. One such market player is Susan Schmidt, portfolio manager at Exchange Capital Resources. Good morning, good morning. Can I say it this way? What is with you people? I mean, it turns on a dime these days.

[Susan Schmidt]

That's fair, that's fair. That's because it's such an unknown. We just have no idea how soon companies are going to realize operating profitability, operating improvements from this AI investment. These are big numbers. Investors just can't figure out what to make with it.

[David Brancaccio]

I mean, yesterday was guided by huge meta, Facebook, Instagram, et cetera, doing a huge deal to buy AI chips from Advanced Micro Devices. But today we get the other big AI chip makers results. It'll be late in the day after the market closes. That famous company Nvidia.

[Susan Schmidt]

Nvidia has been very good at under, promising and over delivering on recent quarters. It really is priced for perfection. So investors have expected the best to happen. They're going to see a very strong guide. They want management to talk about how good things are for the future. If Nvidia misses estimates or talks about margin pressure, I think investors have the potential to get very nervous and we could see another swing in AI stocks tomorrow.

[David Brancaccio]

All right, and for the rest of us, margin pressure. What's that?

[Susan Schmidt]

Margin pressure means that operating profitability comes down rather than expands. For Nvidia, who's making the chips? The more chips they make, presumably the more profit and the better scale they should have. So the higher profit margins.

[David Brancaccio]

Susan Schmidt is at Exchange Capital Resources. Yesterday, on Marketplace's half hour program, my colleague Kai Ryssdal spoke to Atlanta Fed President Rafael Bostic, who steps down at the end of this week. Inflation and the labor market were part of that, but also those two syllables, AI. Here's Bostic.

[Rafael Bostic]

There are lots of reports, you all have done a number of these as well, to suggest that these new technologies are going to change the way that businesses think about how many people they need to produce the goods that they want to produce. That could be a structural change. If that winds up being true and it winds up penetrating through the entire economy, all of our benchmarks are going to have to change. Like how we think about what a good jobs number is or what unemployment rate that's reasonable should be, because the same number is sending a very different signal.

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[David Brancaccio]

$50 billion a month. That's how much Moody's expects companies to spend on average to build data centers over the next few years to pay for all that construction. Morgan Stanley expects companies to sell a record amount of investment grade corporate bonds this year. As Marketplace's Justin Ho reports, all of that new debt could have some side effects.

[Justin Ho]

Corporate bonds are generally viewed as riskier than government bonds, so they tend to pay higher yields. But when it comes to big tech companies, investors don't see that much more risk. So when it comes to the interest on their bonds, you're not getting a lot of additional compensation to own some of this debt versus just owning treasury securities. That's Lawrence Gillum at LPL Financial. He says the rates big tech companies pay could always go up. For instance, if a big wave of new corporate bonds floods the market, supply might outweigh demand. That means, in theory, that you could see higher yields with this amount of issuance coming to market to attract additional demand. In other words, pay more interest to attract more investment. And if that happens, investors who'd otherwise pour money into the safety of government bonds could be persuaded to throw some money at the corporate sector.

[Ana Chieslock]

You can think about to some extent the corporates being substitutes for Treasuries, especially those that have a very high quality.

[Justin Ho]

Ana Chieslock is a finance professor at Duke University. She says if investors start to favor corporate bonds over Treasuries, the interest rate the government pays to borrow could be affected too.

[Ana Chieslock]

Then you can imagine that both yields on Treasuries and on corporates move up.

[Justin Ho]

That in turn could make all kinds of consumer borrowing more expensive. Mortgages, credit cards, auto loans. But Cheeselock says that's not guaranteed. But for one, corporate bond yields might not rise if there's enough demand for that debt.

[Ana Chieslock]

I don't think these companies are just coming out there and saying, well, we just want to issue. There is a possibility that they are catering to certain demand.

[Justin Ho]

Plus, there are many other factors that could also influence bond yields this year. Stock market volatility, inflation expectations, tariff uncertainty. Zachary Griffiths at the research company Credit site says if growth slows this year, government bond yields could actually fall.

[David Brancaccio]

The softening of the economy pushes the Fed to cut rates. More typically in a slower growth environment, when you have growth concerns, you see longer term yields fall as well.

[Justin Ho]

But either way, the sheer amount of new debt expected to hit the market this year will affect rates. Lawrence Gillum at LPL Financial says the Treasury Department is also going to issue trillions of dollars worth of new debt. There's a glut of supply coming to market and demand needs to keep up with that supply. Otherwise you're going to have higher yields, especially, he says, if companies keep selling trillions of dollars of bonds. I'm Justin Ho for Marketplace, and in

[David Brancaccio]

Los Angeles, I'm David Brancaccio. It's the Marketplace Morning Report from APM American Public Media. America's housing system is under strain. From natural disasters to the rising cost of shelter. The challenges we face and the solutions we embrace will shape how we live for the next hundred years. I'm David Brancaccio, host of the Marketplace Morning Report, and I've been working with this old House radio hour on a special podcast episode that explores how Americans are reimagining housing in this changing world. It's called Building Tomorrow. From wildfire resistant houses in California to tiny home communities in Texas to a super duper energy efficient house in the Northeast, this special blends innovation, new business models and personal stories to explore how resilience, affordability and our climate reality are redefining what home looks like. To listen, go to Marketplace Morning Report in your podcast. Apparently.