President Donald Trump's Bull Market Is Banking on the AI Infrastructure Build-Out, but the Bond Market Has a Reality Check for Investors

Over the roughly six years that President Donald Trump has been in the White House, the stock market has thrived. In 2026, the ageless Dow Jones Industrial Average (DJINDICES:^DJI), benchmark S&P 500 (SNPINDEX:^GSPC), and tech-driven Nasdaq Composite (NASDAQINDEX:^IXIC) have all climbed to several record highs.

The bull market that's flourished under Trump has had numerous catalysts, including better-than-expected corporate earnings and record S&P 500 share buybacks, the latter of which was spurred by the signing of the Tax Cuts and Jobs Act into law in December 2017. However, the Trump bull market wouldn't be where it is today without the artificial intelligence (AI) revolution.

President Trump's bull market may be on shakier ground than the major stock indexes suggest. Image source: Official White House Photo by Molly Riley.

President Trump and his administration are banking on the AI infrastructure build-out to bolster economic growth and send the Dow, S&P 500, and Nasdaq Composite to new heights. But there's a problem: the bond market strongly disagrees with Trump's AI optimism.

The evolution of AI is a $22.5 trillion addressable opportunity

In the mid-1990s, the advent and proliferation of the internet changed the growth trajectory for corporate America forever. The internet opened new sales and marketing channels that broadened the reach of businesses, large and small.

For decades, Wall Street has been waiting for the next "internet" moment. The evolution of AI looks to be it.

According to IDC, AI is expected to transform workforces and reshape several industries, leading to an estimated $22.5 trillion in cumulative economic value between 2025 and 2031. This jaw-dropping figure explains why so much capital is being spent on the AI infrastructure build-out and the integration of AI solutions into core cloud service platforms.

Demand for AI hardware is off the charts. Graphics processing unit (GPU) kingpin Nvidia (NASDAQ:NVDA) can't keep up with demand, while high-bandwidth memory provider Micron Technology (NASDAQ:MU) has been booking orders up to several years in advance. This combination of insatiable enterprise demand and ongoing supply shortages has produced otherworldly pricing power and gross margins for AI hardware companies.

Announcing The Stargate Project The Stargate Project is a new company which intends to invest $500 billion over the next four years building new AI infrastructure for OpenAI in the United States. We will begin deploying $100 billion immediately. This infrastructure will secure American leadership in AI, create hundreds of thousands of American jobs, and generate massive economic benefit for the entire world. This project will not only support the re-industrialization of the United States but also provide a strategic capability to protect the national security of America and its allies. The initial equity funders in Stargate are SoftBank, OpenAI, Oracle, and MGX. SoftBank and OpenAI are the lead partners for Stargate, with SoftBank having financial responsibility and OpenAI having operational responsibility. Masayoshi Son will be the chairman. Arm, Microsoft, NVIDIA, Oracle, and OpenAI are the key initial technology partners. The buildout is currently underway, starting in Texas, and we are evaluating potential sites across the country for more campuses as we finalize definitive agreements. As part of Stargate, Oracle, NVIDIA, and OpenAI will closely collaborate to build and operate this computing system. This builds on a deep collaboration between OpenAI and NVIDIA going back to 2016 and a newer partnership between OpenAI and Oracle. This also builds on the existing OpenAI partnership with Microsoft. OpenAI will continue to increase its consumption of Azure as OpenAI continues its work with Microsoft with this additional compute to train leading models and deliver great products and services. All of us look forward to continuing to build and develop AI—and in particular AGI—for the benefit of all of humanity. We believe that this new step is critical on the path, and will enable creative people to figure out how to use AI to elevate humanity.

— OpenAI (@OpenAI) January 21, 2025

President Trump has announced or spearheaded several big-dollar projects in the AI arena. Just one day after his second-term inauguration, on Jan. 21, 2025, he announced a massive $500 billion AI infrastructure joint venture known as Stargate, backed by ChatGPT's developer OpenAI, Oracle (NYSE:ORCL), and SoftBank (OTC:SFTBY).

In July 2026, the Trump administration announced that more than $5 billion in commitments would be made to expand the Genesis Mission. This money will be used to harness the power of AI for scientific purposes.

With the president frequently pointing to the stock market as a measure of his administration's success, the data center build-out and the ongoing integration of AI into core applications are necessary for the Trump bull market to march higher.

Unfortunately, bond traders are offering an unmistakable warning about the AI infrastructure build-out for those investors willing to listen.

Image source: Getty Images.

The bond market has a dire warning about AI stocks

Arguably, the bond market is more adept than the stock market at removing emotions and subjectivity from the equation. Whereas hype can occasionally whipsaw stocks, bond traders solely care about a company's or the economy's underlying data. It's all about math – and for bond traders, the math isn't mathing right now regarding the AI infrastructure build-out.

When a public company issues debt, it usually has a par value of $1,000. The par value is the principal amount that the bond issuer agrees to pay the bondholder when it reaches its maturity date. Commonly, this "$1,000" figure is quoted as $1 by financial platforms.

Ideally, companies that issue debt will have their notes trade at or near par value. This would imply that bondholders have confidence in a company's ability to repay its obligations. Since bond prices and yields are inversely related, a bond trading near $1 also indicates that investors don't feel the need for a higher yield to hold a note to maturity.

In 2026, we've been witnessing an absolute rout in corporate bonds for AI-driven companies, with long-duration bond prices plunging and yields soaring. As of the closing bell on Oct. 27:

• Nvidia's 2060 note was trading below $0.64
• Oracle's 2065 note was trading below $0.73
• CoreWeave's (NASDAQ:CRWV) 2031 note was trading below $0.80
• Meta Platforms' (NASDAQ:META) 2064 note was trading below $0.77

Several other corporate bonds in the AI space are trading below $0.90. While bond traders likely aren't concerned about the solvency of industry titans like Nvidia, this bond rout suggests that they want considerably higher yields to hold long-duration notes. In other words, there's genuine skepticism about the sustainability of the data center build-out.

Credit markets are flashing WARNING SIGNS across the AI trade: Oracle, $ORCL, 5-year credit default swap (CDS) spread has surged to ~263 basis points, while SpaceX's has risen to ~203 basis points, both at record highs. At the same time, CoreWeave's $CRWV, 5-year CDS is up to a record 982 basis points. This comes as tech companies have issued nearly $500 billion in new debt this year to finance AI infrastructure, with 9 US investment-grade bond deals worth at least $25 billion each. The growing debt burden is colliding with uncertainty over whether AI revenues will justify the enormous spending. As a result, investors are increasingly demanding higher compensation to take on credit risk. Oracle's market-implied 5-year default risk has risen above 20%, compared with around 16% for SpaceX and more than 7% for Nvidia. The pressure could intensify further, with Goldman Sachs projecting hyperscaler debt issuance to jump from $250 billion in 2026 to a massive $420 billion in 2027, as 35% of next year's capital spending is expected to be debt-funded. The AI boom is now testing credit markets, as investors begin repricing the risks behind Big Tech's unprecedented borrowing spree.

— Global Markets Investor (@GlobalMktObserv) October 14, 2026

Bond traders are likely also aware of historical precedent. Since (and including) the advent of the internet in the mid-1990s, every hyped tech innovation for more than three decades has navigated a bubble-bursting event. The reason these bubbles form and subsequently burst is that investors constantly overestimate the pace of adoption and/or optimization of hyped innovations.

Although AI has shown no evidence of an adoption issue, businesses don't appear to be particularly close to optimizing this technology to boost sales and profits. Don't forget, it took until well after the dot-com bubble burst for businesses to understand how to optimize internet-based solutions. It'll likely be many more years before public companies optimize AI to truly boost their bottom lines.

Based on long-duration corporate bond prices, the table appears set for an AI bubble-bursting event that upends the Trump bull market.

Sean Williams has positions in Meta Platforms. The Motley Fool has positions in and recommends Meta Platforms, Micron Technology, Nvidia, and Oracle. The Motley Fool has a disclosure policy.