When AI And Tariffs Hit The Same Week

The equity tape is noisy. The credit tape is decisive.

Something changed this week, and it wasn’t a stock chart.

Leveraged loan prices slipped to their lowest level since April 2025. The average bid is now below 95. That might not sound dramatic. But in this market, a one-point move changes how new deals clear.

AI fear in software. Tariff confusion. Accounting questions in private credit. All of it is landing in the same place: funding costs.

Equity can rally on a headline. Loans cannot. When secondary bids fall, issuers either pay more or pull the deal. Several tech transactions have already been shelved.

This isn’t a freeze. It’s friction.

And friction is how cycles turn. Quietly. One pulled deal at a time.

Translate headlines into execution risk. Loan prices below 95 mean higher yields and less tolerance for aggressive structures. 

Sponsors don’t get the same leverage at the same price. Issuance slows before defaults rise. Credit adjusts while earnings still look fine. 

That’s the shift underway.

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The signals below are not forecasts. They are mechanisms already in motion. Each one reveals the same pattern: duration is being financed before economics are fully proven.

Quarter-end just got interesting.

A hedge fund letter claims some business development companies are shifting borrowings off balance sheet before reporting dates. 

The debt disappears for a few days. Then it comes back. Optics improve. Leverage looks lower. Investors breathe easier.

Maybe it’s isolated. Maybe it isn’t. But the timing matters.

BDCs promise liquidity every quarter. They cap redemptions at 5%. If requests climb toward 10%, gates can close. That’s written in the structure.

At the same time, defaults are creeping higher and borrowing costs haven’t fallen the way managers hoped. Distributions still need to be paid. That creates pressure.

When managers focus on keeping payouts steady while leverage quietly rises, the surface looks calm. Underneath, the balance sheet is working harder than it should.

The question now isn’t whether this practice is widespread. It’s what it says about stress.

The perception of steady leverage is now in question. Off-balance-sheet moves suggest managers are managing optics, not reducing risk. Liquidity promises feel solid until redemptions test the gate structure.

A 20% drop gets attention.

CoreWeave just told the market it plans to spend $30 to $35 billion next year. That’s above expectations. The stock fell fast. Investors heard one thing: more debt, more buildout, thinner margins.

The CEO says demand is relentless. Backlog is enormous. Cost of capital has come down. He sounds confident.

Here’s the part that sticks.

The company rents AI-packed data centers to a small group of hyperscalers. Revenue concentration is real. The infrastructure ramp is aggressive. Most of it is financed with debt.

If loan markets get tighter, even slightly, that funding math shifts. At this scale, a few basis points compound quickly. Expansion is expensive before it is profitable.

Demand can be strong and funding still fragile. Both can be true at the same time.

What used to work won’t anymore. Debt-funded hypergrowth assumed cheap refinancing and stable spreads. When loan markets hesitate, capital intensity becomes the pressure point.

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$110 billion. That number alone resets the room.

Amazon. Nvidia. SoftBank. A $730 billion valuation. Nearly 900 million weekly users. $20 billion in recurring revenue. It sounds unstoppable.

But scale has a cost.

OpenAI is committing to multi-gigawatt infrastructure, expanding cloud obligations, and pushing deeper into enterprise products. Some of that capital is tied to commercial commitments, not just pure equity. Conditions are attached. More capital may come later.

Revenue is growing. Burn is real. Infrastructure commitments are long term.

Equity investors are still willing to fund size and speed. Credit markets are trading below par. That split is getting wider.

At some point, monetization has to catch up to infrastructure velocity. That’s where the tension lives.

What matters now more than last week is monetization velocity. Record valuations and infrastructure commitments raise the break-even bar. Scale without cash conversion tightens future financing flexibility.

The loan market just blinked.

Secondary leveraged loan prices dropped to the lowest level since April 2025. Month to date, bids are down more than a full point. Year to date, nearly two.

That doesn’t sound dramatic. But here’s why it matters.

Secondary prices set the tone for new deals. When bids fall, new loans have to price at wider spreads or they don’t get done. 

Over the last month, five deals were pulled… three in tech. February issuance is now tracking as one of the slowest months since mid-2023, excluding the usual holiday slowdowns.

You could feel that slowdown before you saw it in the data. Until one recent launch, the market went nearly a month without a single LBO financing. Sponsors noticed. Bankers noticed. Pipelines started thinning before anyone said it out loud.

At the same time, tariff policy came back into focus. The Supreme Court ruling scrapped prior collections, and refunds are technically owed. But timing is unclear. Companies can’t count that money today. Customs has stopped collecting. Lawsuits are forming. No one can confidently model when, or if, the cash actually lands.

Now add AI pressure on software. Equity markets reacted first. Loan markets are adjusting more slowly, but they are adjusting.

Borrowers with 2026 to 2028 maturities face two variables they do not control: base rates and spreads.

A 150 basis point widening doesn’t just raise interest expense. It forces bigger equity checks, trims projected returns, and stretches exit timelines.

And once exits stretch, distributions slow. When distributions slow, fundraising tightens. That’s how the pressure moves upstream.

Getting a deal done just became harder. And when execution gets harder, cycles start to turn.

Investor Signal: Execution Friction Is The First Warning

Execution risk is rising before credit metrics deteriorate. Cheap refinancing and fast LBO clears assumed stable secondary demand. When bids slide and deals pull, leverage math tightens before defaults ever rise.

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Start with the refinancing calendar. If maturities sit in 2026 to 2028, the spread move already changes the math. A wider clearing level means more equity has to go in or returns fall. That shifts behavior fast.

Treat tariff refunds as delayed assets. They may arrive. They do not solve near-term obligations. Counting on them too early creates pressure later.

Separate AI demand from funding access. A full backlog looks good until debt needs to roll. The market decides what clears, not management guidance.

Watch secondary loan bids daily. That’s where tone changes first. When deals pull instead of price, sponsors slow down. Deployment follows funding confidence.

The market just shifted from chasing growth to pricing durability. Loan buyers are quietly adjusting spreads, leverage, and terms while equity still funds ambition. 

Nothing has cracked yet, but the margin for error is thinner. In this phase, access to capital matters more than story. 

When the bid weakens, time becomes expensive. Credit doesn’t panic. It tightens.