Either AI or public debt could crash markets. But probably not both

A leader weighing two market fears: unsustainable rich-world public debt and an AI boom whose revenues fail to arrive. Reported facts: the 30-year US Treasury yield rose a full percentage point between end-February and early October as the Iran war lifted inflation and rates; concern centres on Japan, Britain and especially France; CoreWeave’s five-year bonds yield 15% (from 10% in July), its shares fell about a third in a month, and Anthropic’s slowing revenue growth worries investors; since then many sovereign bonds have rallied (ten-year Treasury yields down about a fifth of a point), though not France’s or Britain’s. The Economist argues the two risks largely offset each other: an AI crash would ease the scramble for capital and push central banks to cut rates, making public debt easier to service. Only a financial-crisis-scale crash would make them collide, which it does not expect, because AI financing is better understood than 2007 mortgage securities, banks are safer, Nvidia backstops much of the industry and AI assets are a smaller share of household wealth than housing; its closest analogy is the 2000 dotcom bust, which brought a mild recession and falling yields. Caveat: debt and deficits start higher than in 2007-09. For now it worries more about sovereign debt, which could threaten the dollar’s haven status.