AI debt market faces investor earnings scrutiny as capex commitments continue to accelerate.

Corporate borrowing for AI infrastructure is emerging as a critical test for financial markets, with investors demanding stronger evidence that record spending translates to sustainable earnings growth, according to RBC BlueBay Asset Management.

Mark Dowding, chief investment officer for fixed income at the $153 billion Canadian asset manager, said robust demand continues supporting debt issuance despite higher interest rates and renewed geopolitical tensions. However, he warned that questions around AI earnings "is only likely to grow in significance in the months ahead."

"An abrupt reversal of sentiment surrounding AI could represent a significant macro shock. That said, we still see little sign of this occurring for the time being," Dowding said.

Market sentiment remains positive, he noted, with U.S. Treasury yields continuing to rise despite President Donald Trump's declaration that the ceasefire with Iran was over. "Investors have concluded that there seems very limited appetite for the US administration to be dragged back into a regional quagmire," Dowding said. "Consequently, this narrative has helped to dampen volatility. As a result, prevailing market sentiment continues to lean towards a summer of owning carry."

This backdrop has sustained robust demand for new equity and debt issuance. Amazon's USD25 billion corporate bond issue this week was the seventh deal of that size since the start of 2026.

But Dowding cautioned that the sheer volume of fundraising is becoming a constraint as investors scrutinize whether companies can justify increasingly ambitious investment plans. "The sheer volume of new debt and equity issuance appears to be a growing constraint, which is capping upside price momentum. It seems very natural to expect that this dash to raise cash is going to see markets become worried with respect to the efficacy of large-scale corporate investment programs."

AI investment could also sustain elevated U.S. inflation by driving demand for semiconductors and technology inputs, potentially reducing the likelihood of rapid monetary easing. "What may currently be more important for fixed income investors is that we see the robust AI investment dynamic makes it likely that US inflation will be relatively slow to fall and this is likely to keep the Fed on a hawkish path," Dowding said.

Money markets are broadly pricing the Federal Reserve's policy path fairly, with expectations centered on a September rate increase followed by another move next year.