The State of AI Financing: A Pause, Not a Pullback

September marked the second-lowest month of AI-related supply this year, with only ~$23bn globally. In our view, this slowdown is temporary and driven by a combination of significant front-loading of issuance in the year and building political/regulatory constraints. We expect a busier fall and 4Q, as the focus shifts to 2027 capex. With roughly $466bn of issuance YTD, we think 4Q supply might slow down sequentially while remaining above September's pace. Collateral-backed paper still has better risk-reward than unsecured corporates, and we reiterate our preference for colocation over hyperscaler data center ABS. In US IG, we think the macro backdrop - and not elevated supply - is the biggest test between now and year-end, with outflows expected on the back of a sharp drawdown in returns.