AI Bubble Watch BETA
No one knows when or if AI stocks, or the market itself, will head into correction territory or tip into a broader financial crisis. This dashboard tracks a few data points that may indicate trouble.
The data below are strictly for informational purposes and are not investment advice.
(market-wide)
(riskiest junk)
(iShares high-yield ETF)
HYG is updated twice daily (noon & 5pm ET). The CCC spread, HY spread, and Financial Stress Index update once at the end of each day. The Michael Burry dial changes only when his position does. Last update: Jul 28, 1:38 PM ET.
Sources and methodology
Sources:
High-yield spread — Federal Reserve Bank of St. Louis, series BAMLH0A0HYM2.
CCC spread — Federal Reserve Bank of St. Louis, series BAMLH0A3HYC.
HYG ETF — Yahoo Finance.
Financial Stress Index — U.S. Office of Financial Research.
For the three credit dials:
Green: within normal historical range.
Yellow: territory that has historically preceded credit stress.
Red: Levels associated with significant market disruption in past cycles (2018, 2020, 2022).
The Financial Stress Index is scored differently — it is a standardized index centered on zero (positive = above-average global stress, negative = below-average). Green is below zero; yellow begins at zero; red is +5 and above, a level reached only in the 2008, 2011, and 2020 crises.
Color gradients are for illustrative purposes only and do not correspond to recognized industry standards.
About the dials
- High-yield spread
(market-wide) - The high-yield spread is the extra interest risky companies must pay to borrow, compared with the U.S. government. So 3% means that a company is paying 3% more than the U.S. government to borrow money in the bond market. When it climbs, it means lenders are getting nervous. This is a broad, early indicator of trouble in private sector lending to corporations.
- CCC spread
(riskiest junk) - The CCC spread measures the same thing as the high-yield spread above, but only for the riskiest borrowers — companies rated CCC or lower. Because these borrowers are most vulnerable, their spread tends to blow out first when credit markets get nervous.
- HYG
(iShares high-yield ETF) - HYG is an ETF that contains hundreds of high-yield (risky/junk) corporate bonds. The HYG ETF trades like a stock. The number in the dial represents the percent that the price of the ETF has dropped versus its 52-week high. If the 52-week high is $100 and the current price is $98, the dial says 2%. A lower price (and thus a higher percent in the dial) means investors think their bonds are riskier, and they have to sell them at a discount.
- OFR Financial Stress Index
- The US Office of Financial Research financial stress index is a daily snapshot of stress in global financial markets that tracks 33 variables. It offers a higher-level view of how stinky the global financial system is. Because it tracks a wide range of variables across global markets, it may be less likely to react to problems in the AI sector in the US.
- Michael Burry
- Michael Burry was one of the investors who predicted the 2008 financial crisis. He was played by Christian Bale in The Big Short. In early July he shorted NVIDIA, Micron, and the Philadelphia semiconductor index.
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