Liquidity Squeeze Puts the AI Trade on Notice

A tightening liquidity environment is casting doubt on the sustainability of the AI trade, signaling potential stress for middle-market credit investors exposed to tech-driven growth narratives. As funding conditions constrict, credit professionals must reassess risk premia and covenant protections in AI-related deals, where valuations and cash flow projections may face downward pressure. This dynamic underscores the importance of rigorous due diligence and cautious underwriting amid a market recalibration that could ripple through leveraged finance structures tied to AI sector growth.