The Bottom of Junk Crossed 1,000 Basis Points | Micron Guided $4.5 Billion Past Forecasts | AI Chiefs Split in Private

1,007 basis points

The spread over Treasurys on CCC bonds, the lowest tier of junk, on Wednesday. It last ran this wide in March 2023.

The riskiest bonds crossed into distress.

The 10-year ended near 5.3%, its highest since 2002. Traders now lean toward no Fed hike in October, but still price more within a year. The Nasdaq rose 2.5% last quarter. The Russell 2000 fell 7.5%. Micron guided far above forecasts. AI chiefs signed a pledge, then split in private. Some at Google doubt its new model.

The Riskiest Junk Crossed 1,000 Basis Points. Higher Grades Held.

Bonds rated CCC traded 1,007 basis points over Treasurys on Wednesday. They started September at 860. That is the widest since March 2023, when Silicon Valley Bank and Credit Suisse failed. A premium that high typically implies a high chance of default, restructuring or loss.

Higher rates are the pressure most cited. CCC spreads have widened since April as investors braced for the Fed to tighten. Higher yields raise interest bills and make refinancing harder, just as many bonds and loans come due. Smaller firms also struggle to pass on energy costs. Franklin Templeton's Jack McIntyre looks to history. "When the Fed hikes into higher energy prices bad things happen to the economy," he said.

More than half of the worst CCCs are in technology, media and telecom, per Barclays. Cable and satellite firms lag most. Spreads on higher-rated junk have held fairly steady.

On Tuesday, junk's worst September since 2022 looked like rates, not defaults. At the bottom tier, the price now says otherwise.

The AI build is crowding the same market: low-rated AI issuance hit $88 billion this year, per Goldman, up from $20 billion in late 2025, competing for the same buyers the weakest borrowers need to refinance.

Where the Backstops Stop

Weak AI tenants with a Big Tech guarantor still get funded. The CCC tier shows what credit costs with no backer at all. Watch three things over the next 60 days. Do CCC spreads keep widening? Do single-B and BB spreads follow? Does a backed AI borrower slip toward distress?

SIGNAL 1: Micron's Sales Nearly Quadrupled. Buyers Still Want More Than It Can Make.

Micron (MU) posted $54.23 billion of revenue last quarter. A year earlier it was $11.32 billion. It guided to about $61.5 billion this quarter, against about $57 billion expected.

Chips from Nvidia (NVDA) and AMD need more high-bandwidth memory than the leading makers can supply. Micron plans to spend $250 billion on two new U.S. campuses to make it.

Same Boom, Opposite Ends

The AI build showed two faces on the same day. Micron sells a scarce part, and it guided higher with the 10-year near 5.3%. At the far end of the credit scale, the weakest borrowers now pay distress spreads. The test for Micron is whether its new plants arrive while the shortage still sets the price.

SIGNAL 2: AI Chiefs Signed a Safety Pledge Together. In Private, Some Questioned Amodei's Warnings.

The pledge came out of a White House lunch Tuesday. Afterward, Nvidia's Jensen Huang and others questioned Anthropic's Dario Amodei, people familiar said. They asked why he was so extreme in public about AI's risks. Amodei said it is important to be honest with the public.

This summer, Anthropic, OpenAI and Google backed a FINRA-style industry watchdog. Huang, Meta's Mark Zuckerberg and Elon Musk told Trump it would give the top labs too much power. The idea was dropped. Anthropic is preparing an IPO it hopes will value it at about $2 trillion.

Separately, OpenAI said it shut down a July effort to pull hidden reasoning from its models. It tied a core cluster to China's Moonshot AI, which did not immediately respond. OpenAI shared its findings with other labs.

The Labs Share Threats. They Don't Share a View of Risk.

The labs work together against outside threats but split on how much risk to admit. Self-regulation only works if they agree on what to review. The test is whether the principles become shared reviews or stay a statement.

SIGNAL 3: Google Shipped Gemini 4. Some Insiders Say It Scores Better Than It Works.

Alphabet (GOOGL) began rolling out Gemini 4 Argon, its most advanced model, to a few cyber partners. Google says it leads several benchmarks. Some insiders say it does less well on real work, such as front-end design. Two people said it appears shaped by "benchmaxxing," tuning a model for test scores over the job.

Google said it is wrong to say the model underperforms in coding. One employee said there is "large consensus" it is at the frontier. Google dropped a planned Gemini 3.5 Pro after missing its June target.

The Debt Needs Work Done, Not Scores

The AI debt rests on models doing paid work. Brookings projects $10.3 trillion of AI infrastructure spending. That runs from 2025 to 2032. If it is not as productive as assumed, "this will have been malinvestment," said Minneapolis Fed chief Neel Kashkari. Gemini 4's wider paid rollout is the first real-work test.

The theme Wednesday was price catching up to proof. CCC bonds now price a high chance of default. Micron's guide rests on orders it cannot yet fill. The pledge showed unity in the photo and a split in the room. Gemini 4 leads on scores, and some insiders doubt the work. At the bottom of the credit scale, price caught all the way up, and the word for that is distress.

This week PMD asked if the money keeps coming. Wednesday it found the AI money going private, then leaning on a few strong guarantors. The weakest borrowers, with no guarantor, just got their answer. It came as a price, and that price implies a high chance of default.