This is "Wall Street Week." I'm David Westin, bringing you stories of capitalism. As AI lending sets new records, where is all that capital coming from, and can it keep up the pace? Plus, the power of saving put together with the power of compounding. Trump Accounts hold the promise of building capital for the youngest among us. And it turns out that it's not just the federal government getting into the game. And everything old is new again. Alberta, Canada shut down its coal mines in the 1980s, but now it's moving to reopen them, and U.S. trade policy is partly responsible.
But we start with a new effort to support the growth of advanced manufacturing here in the United States, as Ford, JPMorgan, and the state of Michigan announce a launch pad to match buyers with financing with suppliers in a part of the U.S. economy that's fallen behind. We sat down with JPMorgan CEO Jamie Dimon, Michigan Governor Gretchen Whitmer, and Ford CEO Jim Farley as they gathered in Detroit to lay out their plan.
We're trying to fix a problem: onshoring things that were offshored in the name of pennies on the dollar to make here in the U.S. where we need it to be independent, even defend ourselves. Ford's going to commit a billion dollars of purchasing for new companies that are going to be building advanced manufacturing, new capabilities, even magnets and rare earths that we used to buy overseas. And now we're going to buy here with the help of JPMorgan as well as the state of Michigan.
It's Michigan LIFT. Do they have to be Michigan companies?
So companies from Michigan. So, Jamie, I ask you, markets we rely upon for an awful lot, basically, it's served us in good stead for a lot of years in the United States. Why don't markets already take care of this? Why do we need this initiative?
Yeah. So I think first I applaud the initiative. And I also think it's really important that states, government, business work together to fix things like Detroit, which they did. So that's the number one thing. But we need... We lost some of the muscle to do that. So I think markets will take care of a lot of it. But if you're an innovative company and you invented something here, you need an order. He's got to order it. It's got to actually work. They may have to build a real plant, not just an experimental plant. And so it takes that whole group of us to do this kind of thing. So, and hopefully, this will be replicated. This needs to be done everywhere in a lot of industries to make sure the United States can defend itself.
So, Governor Whitmer, why Michigan? Why is it so important for Michigan? Why is this the right place to start this?
Well, we know how to build things. Michigan, that's who we are in our DNA. We were, you know, the arsenal of democracy. This is about homeland security. It's about advanced manufacturing. That's who we are in Michigan. And so when I saw JPMorgan was doing this resiliency initiative, I reached out and said, "Let's talk about what's possible here in Michigan" because I know what we are capable of. And I think government plays an important role with industry as we think about what the future looks like and how do we do advanced manufacturing and protect ourselves. And I think this is a combination of all of those great strengths. But we need to really have a concerted collaborative effort here.
This is, ultimately, about supply chain, as I understand, a resiliency of supply chain, which has been disrupted by geopolitics, actually, by trade, and things like that. How does this fit, for example, Governor Whitmer, with your near neighbor Canada? As we know, there's a lot of back and forth in the auto industry for Canada. How does this initiative fit with that?
Well, I want to first and foremost say the Canadians have been tremendous allies and partners of ours here in Michigan for a long time. Autos go back and forth over that border. This is the busiest crossing in North America, is right here in Detroit. And so we're proud of that long heritage. But I think it's really important that we continue to onshore as much as we can to the United States from all around the world.
But if a Canadian company came along and was innovative in the industrial space and had something, for example, Jim, that you could use, could they apply to this program?
Yes. But we really... We really want this to be a Michigan initiative. But there are so many things in Canada that we depend on, the whole aluminum. All of our trucks are made out of aluminum. All the ingots come from Canada across the border. We do all the finishing of aluminum here going to all of our trucks and all of our plants. And so we are looking for innovative companies even in the aluminum supply chain with this initiative.
So, Jamie, you are the anchor capital provider to this. And that's, obviously, very helpful to either startups or, as I understand it, small companies. It's not just for startups that this program is designed. They're facing a lot of other issues too, including higher interest costs right now, which really hits the small and medium sized businesses disproportionately in the market. How does this fit with the pressures being put on some of these very companies right now as you see bond yields rise, interest rates rise?
I think you have to separate this. We should be doing this regardless of bond yields and things like that. And that may make it harder for some people. But, you know, to me, the ultimate goal is to get inflation down. And so sometimes you have to have a little bit of pain in the short run to accomplish what you need in the long run. But this effort transcends what the market does today and it transcends what the yield curve does today. We need to be doing this for the future safety of the United States of America.
This is part of a larger initiative you announced a while ago. The Security and Resiliency Initiative, basically, $1.5 trillion. This is part of that. Where does that stand? And, by the way, insofar as this goes beyond the state of Michigan, which is, I understand, you'd like other people to copy you and what you're doing. Are you willing to be an anchor capital provider in other places as well?
Totally. So that initiative is real. I mean, we went through what we really need in drones and nuclear and rare earths and semiconductors. And we have a lot of people, a lot of policy around what we need to do to make it work. It's coming up to one-year anniversary. So we'll be announcing the numbers will be better, in my view, than $1.5 trillion. We've also invested $5 billion directly into companies that do security resiliency, not venture, but pre being a public company type of thing. And it is working. This thing is just... if it works, you do... just do more of it. It just should be replicated.
If you go back to the 20s and the 30s, I mean, it really was the engine behind a lot of the U.S. economy. And we're not going to go back to that. We have to go forward to the future. But can Michigan regain some of that prominence?
Absolutely. I think investments like this showcase what we are capable of and uplift. You know, I've mentioned our workforce, but I wanted to make sure to also include we've got the highest concentration of engineers per capita in the country as well here in Michigan. We've got, I think, the talent to tackle the world's problems and to do it here. We just need the organization and the ability to make all of the connections for innovators who are, I think, resolving or coming up with the solutions to problems that we're all confronting.
Jim, in your auto business, as I noticed, there are a few competitors around the world, particularly like in China. And you've talked before about the ability of the Chinese manufacturers, automakers, to move at light speed.
And that we need to speed things up. How do you fit together moving at light speed on the one hand with a program to bring in new companies, whether they're startups or they're small companies, expand? That sounds like that takes time. Can you move at light speed with that level of innovation?
Sure. I don't think we have a choice. You know, it's very humbling to see the competitiveness now around the globe, especially in China. But I have to say, I'm very optimistic. We developed a small group here in the U.S. in California. They out-innovated, I think, companies like the, you know, the really good EV companies in China. We're coming out with a $30,000 vehicle built in Louisville, Kentucky, engineered in California, Michigan. And I think it'll be fully competitive with BYD if they were, you know, in Mexico. So we have to have innovation. But we also have to have these kind of programs and we have to onshore things that we've offshored. Like Jamie said, if we don't do all of that, you know, we're going to be in trouble. But there's an opportunity here that I don't think everyone sees yet that we see at Ford, which is, you know, Ford being a winning global company in this new competitive landscape. But we have to do it all.
Can I just mention one quick thing about Michigan? There are, and don't ask me which states, but there are some states that are doing a pretty good job at driving out small companies, venture capital, innovation and manufacturing. This state wants it. And that is half the game.
I'm not going to mention which states because...
Come on. You can tell us now. Nobody's listening. You can tell us. We'll just keep it among us. But it does point in a direction as we compete on the world stage with China and with everybody else, what advantage can we get from our capital markets, our ability to fund these things? I mean, compared certainly China, but compared to Europe that's mentioned in your piece.
I think the American public doesn't understand the power of our capital markets. So we know it was venture capital and the mosaic, private equity, small companies, middle market companies, large companies. But you can raise tons of capital in debt markets and preferred markets. There's a lot of research around it. So America's capital markets have been growing, growing the size of companies for decades. If you go to certain parts of the world, like, you know, it's unfortunate, but Europe is stagnated. They have great companies. I'm not insulting them, but they haven't kept up. They don't have as much R&D, as much venture capital, as much equity risk taking. They don't have our vibrant equity markets and debt markets, which I want them to have. I want them to fix that. And they'll be good for them. But, actually, ultimately be good for us too because the stronger they are, the more business you... and the more they can defend themselves and pay for what they need for security resiliency. So it is a huge deal. And you go to large parts of the world, they simply don't have it. It doesn't exist.
We can't have a conversation these days without talking about AI at some point, right? And when you talk about capital availability, is there, Jamie, do you see any evidence of crowding out because there's so much demand for capital to go into AI right now.
You know, I mean, the crowding out is coming from the government. So governments around the world are borrowing record sums of money, which is inflationary, by the way, including our government, which is huge. And, but no, I mean, if people are raising productive capital because they think it's going to pay out in all various ways, I think that's a good thing. It doesn't mean it's all going to pay. It doesn't mean you have to pay more for the capital, but, generally, for productive future growth.
So, Governor, it's your state, you should get the last word. Tell us about AI and Michigan, how it fits potentially into this new initiative?
Well, as we think about the initiative, it's about connecting the innovators with the capital and with the customers. And that's really the role of state government in this, you know, in the Michigan LIFT. We're all navigating a world that is changing fast. And that's why I think collaborations like this are going to be important. We've got to be as nimble as we can. That's not generally what government is known for. But I think that when we tackle problems like this, whether it is something on the horizon or something we're dealing with that's changing every single day, that increases our odds of success.
Coming up the amazing story of what seems to be unlimited AI investment and an unlimited appetite to fund it through historic levels of borrowing. Is there any end in sight?
This is a story about trees growing to the sky. They say it doesn't happen. But looking at the investment in AI, you have to wonder whether this just might be the exception. It's already historic and looks only to keep growing. But where is all that money coming from? And can it pay off for investors?
I see through 2027, at least, one trillion dollars. In fact, we are going to be short. I am certain computing demand will be much higher than that.
By now, we all know that AI has an insatiable appetite for compute. And that means more data centers, chips, and other expensive infrastructure. Equity investors have already benefited seeing shares of the 6 hyperscalers rise by an average of 15% year to date. Now it's the debt investors turn.
So the numbers keep growing. And I think that's the challenging piece of it.
Debt investors like Loren Moran, a fixed income portfolio manager at Wellington Management.
When we look back to 2025, we're really... this borrowing from hyperscalers had really only begun. Through the course of 2026 we're probably looking at around 300 billion in the investment grade market borrowings from hyperscalers themselves.
By some estimates, the tech sector accounted for just 5% of investment grade corporate bond issuance in 2024. That number is now close to 20%.
When we think about, over the course of this year, likely we'll see $2.25 trillion of total issuance in the U.S. investment grade market. So it's a pretty substantial portion of the debt that we're seeing in the market. And, importantly, when we think about the actual growth in our debt markets is largely coming from the hyperscalers at this point. And we look at year over year investment grade issuance being up around 35%.
So far what's the appetite for all this debt? And to make it a little simpler, let's start with investment grade for the hyperscalers. So there's other financing, but just start with that. It seems like there's a fair appetite for that debt.
Yeah, it certainly started off with a huge amount of appetite. These were new issuers. They were double-A rated balance sheets. People were very excited to be able to actually buy this debt in the market. I'd say every subsequent deal in every global market that's starting to shift. Buyers are demanding more compensation to lend to these issuers as they're a growing footprint in our markets. The other component is, there's just an overall demand for capital from sovereign balance sheets globally as well. Also a fair amount of M&A activity too. And so we're just seeing a little bit of stress in terms of just the sheer size in demand for capital globally. That's causing more indigestion.
They have had, I don't want to say infinite capacity, but more than enough capacity to do what they need. The real question will be, as we get into next year, does that sustain?
Scott Schulte is the global co-head of investment grade debt syndicate at Barclays. I wonder about how you analyze the risk associated with AI debt. And one of them is what you just suggested. Is there a concentration risk, apart from the index in terms of the equities, just in terms of the debt? Is there a concentration risk when you get that much debt against that particular application?
Right now the big 5 hyperscalers are about 5% of the index. But again go back two or 3 years, that was one to two percent. So that concentration has jumped up meaningfully. Now there's still 95% of the index of other things. But they are now actually becoming some of the leading components. And so whereas banks used to be the top of the index, JP Morgan, Bank of America, because, obviously, perpetual funding needs, they tend to issue much shorter debt. Hyperscalers prefer much longer debt because it fits the business model much better. And so, as you think about what we call the duration of the index, it's extending meaningfully because they issue 20, 30, 40, 100-year debt in some instances.
Moran says we've seen the risks of concentration before.
Hearkening back to, you know, when we think about post GFC and thinking about money center bank concentration, which typically has been the largest source of concentration risk in the market that we've dealt with, the AI hyperscaler trade will easily overtake the U.S. money center banks in terms of concentration over the course of the next year and a half, or two years.
Hyperscalers are flooding debt markets with more than just traditional corporate bonds. Special purpose vehicles allow them to issue bonds specifically for data centers, keeping the debt off their balance sheets.
The investment grade markets, as I mentioned, are actually being asked to bear a lot of different types of risk than we do traditionally. So the hyperscalers may actually get to a point where they're very attractive incremental bond market opportunities whereas data centers are a little bit different. And I think the nuance there is data center financing bears much different risk profiles than we typically have in the investment grade market. You have construction risk. You have permitting risk. You have electrification risk. And so this, ultimately, is being born by a market that this is very new to.
I think where you're seeing more differentiation is in some of the off-balance sheet structures whether it's the GPU financings, the chip financings, the actual data centers themselves. You've seen in recent days there's been force majeure at least implied in a couple instances. And so you have to start thinking about the AI ecosystem holistically and tangentially what impacts it. Meaning can I get the power? Can I get the transmission? Can I get the heating and cooling? Can I get the thing built in two years, when it's supposed to be built? And if it's not, what are the outs that the hyperscaler might have in terms of the contractual agreement on that data center?
It's the hyperscalers issuing much of the debt, but not all hyperscalers are created equal as they go into fixed income markets.
You see actually a fair amount of dispersion within the sector both in terms of absolute levels, but also in terms of how the market treats their credit curves as well. I'd say a big piece of that has actually been governance clarity around financial policy and otherwise. You know, what credit investors typically want is certainty of cash flows, very clear expectations around financial policy prudence. And that is more challenging. This is a sector that, historically, has not had a lot of debt. But we are seeing the market differentiate between more levered balance sheets, highly levered balance sheets, like an Oracle versus less levered balance sheets like a Microsoft. And so it is not all one trade. But you do have an underlying theme that they tend to move with some correlation to one another, but with slightly different betas.
Subadra Rajappa is the head of Americas research at Societe Generale. And though she sees investors paying attention to the health of borrowers balance sheets, she says there's still a market for riskier hyperscaler debt if the price is right.
There are some names that are trading at a significant discount. The markets are getting more and more sensitive. I mean, just in the last couple of weeks, we've seen a significant amount of widening in some of the high yield names. So the investors are getting more and more discerning. The general level of yields have gone up quite substantially. And corporate bond spreads are still relatively healthy. So for the investor, it's a question of all-in yield. And the all-in yield is still quite attractive in some of these names.
But with so much debt being taken up with AI, what does that leave for the rest? Those needing capital for things other than AI infrastructure, especially, when yields overall have been steadily rising for all borrowers. Well, talking about those spreads or those yields, is there a noticeable difference between, on the one hand, AI borrowing and other corporate investment grade?
AI borrowing is quite a lot. It might be crowding on some of the other investors who are coming into the market. But it really depends on what type of investor you're talking about. Some of the corporates that are trying to come to the market can wait for a little bit longer and issue next year. They're trying to evaluate the general level of yields right now and figure out if the opportunities are right for them. But, you know, the hyperscalers have their mandate. They're going to be issuing a lot this year. More to come next year. And they're a little bit, you know, I would say, time agnostic, if you will.
There are risks associated with AI, execution risk of a variety of sorts whether it's power or it's resistance, community resistance, also concentration risk because there's just so much of it. Is that being reflected in the bond market so far for AI?
That's a very good question, David, because I think that it's really hard to see that in the data as of yet. Like I just mentioned, I mean, some of the high yield names are starting to come under pressure. You are seeing investors being a little bit more discerning about where they put their money to work. But as of now I think that the supply is being very well absorbed.
It's not just AI debt that looks like it's growing to the sky. AI companies are right alongside other corporate borrowers in competing with sovereign issuers as governments around the world contend with debt burdens that just keep growing higher with the inevitable move to higher yields.
So the broader dynamic is at play here for me still, even though we're talking about hyperscalers and the issuance that's coming out of the corporate bond sector, is the magnitude of the debt and deficits in developed markets. So this is not just a U.S. phenomena. You're seeing a lot more of that happening globally whether it be Japan or the U.K. More issuance coming from the likes of Germany for defense spending or infrastructure as well as some of the spreads that we've seen in countries like France that are starting to widen out. So government bond debt, in general, you know, for the longest time, has been a source of demand for investors. And now you're seeing this competition for capital, if you will. So investors now have the option of either investing in government bonds or corporate bonds at higher yields. But, broadly speaking, my perspective is that government bonds are starting to crowd out the larger, you know, bond market complex.
Investors haven't found the ceiling for the debt binge yet. But unless these trees truly do grow to the sky, there is a ceiling up there somewhere. And when we reach it, the consequences may extend well beyond the bond market.
I think that my concern, broadly speaking, is all the issues that you just raised with what happens to this investment. How does that, you know, do these larger companies recoup some of their capex that they're spending in AI for not just this year, but for the next several years? And, you know, there's also, as we head into the midterms, I'm a little bit concerned about, you know, what the pushback might be for data center development. Would that slow down the progress on AI?
Up next, we all know about the enormous difference between those who have capital and those who don't. Now governments are getting into the business of helping seed savings accounts for children at birth. We go through how it is supposed to work.
This is a story about the miracle of compounding. As Benjamin Franklin's popular saying goes, "a penny saved is a penny earned." And Einstein added to it that compounding is the most powerful force in the universe. But for that force to work there have to be those pennies saved. And, unfortunately, today Americans are saving less and borrowing more. Now governments are stepping in to jumpstart savings programs starting as soon as children are born. Our colleague Scarlet Fu brings the story from inside America's wallets on the growing options to save more and smarter.
I think I got 3 new puzzles today.
When Wendy Robinson's children were born, she was in her 30s, still paying off her student loans and juggling the many costs of being a young parent.
For a good chunk of when my kids were little, our costs for child care were more expensive than our costs for our mortgage.
Then came the 2008 financial crisis, a shock that left Robinson and many more Americans deeply in debt.
Our family had the misfortune to buy a house in Arizona in 2006, which turns out to be about the worst time to have ever bought a house.
When Robinson finally began putting money aside for her son's educational savings fund, she knew she was running out of time.
It was just realizing, "Oh, we've only got like 6 years," because my son was already in middle school by that point.
This summer the Trump administration launched a new savings program that might have helped parents like Robinson, letting families and friends put money into a fund for babies from the day they are born with a 1000 dollar gift from the government to get them started. It's an idea that National Economic Council director Kevin Hassett has been interested in since the 1990s.
Very very few Americans have benefited from the massive compounding from equity markets and other forms of capital investment. But we need to have an account so that when a kid's born, they can sort of see that they're part of the American dream too. And the compounding can help make their life better.
Today Hassett's idea is realized in the form of Trump Accounts. The latest offering in a patchwork of federal savings accounts available to families, each with its own rules and tax treatments.
So I think the best way to explain a Trump Account is that it's an early way to save for retirement.
Tricia Scarlata is head of education savings at JPMorgan, where she manages strategy for the 529 college savings plan.
So I think with Trump Accounts that's even encouraging families even at a younger age to start thinking about their child's financial future. And I think the ultimate goal in everything that we do, you know, is to try to prepare people as early as possible, so that we eliminate this long term debt. Student loan debt today is at $1.65 trillion. Credit card debt is $1.2 trillion. It's a real problem.
Saving those pennies early and letting compound interest grow is a good start, particularly with a seed grant from the government. But the net results available to the child later in life also matter especially when you factor in taxes. Both 529s and Roth IRAs have their advantages come tax season because qualified withdrawals including all investment gains come out completely tax free. Trump Accounts will work differently with earnings taxes ordinary income when the child is qualified to start withdrawing the money at 18. That means families don't get the same tax-free growth as a 529 and Roth IRA. Adam Michel studies tax policy at the Cato Institute and he says that could be a problem.
The Trump Account is this account that's put on top of the existing savings ecosystem. But it isn't a simplification.
They have their sort of seed history in universal savings accounts. This idea that we have one universal, one-stop shop for individual savings where you can put your own money in, it grows tax-free, and then you can use it for whatever you want and whenever you want without any strings attached. The Trump Account, because of the political process and the constraints in the big bill that it was part of, got contorted in that Congress wanted to add this baby subsidy into the mix, which then, when you start putting government money into the accounts, requires a bunch of new strings to be attached so that people don't just take the money out immediately. The underrated piece of Trump Accounts is that to the extent that a less sophisticated family chooses to put their money in a Trump Account instead of somewhere else, you could be actively making those kids worse off if the dollar in the Trump Account faces higher taxes than where it otherwise would have gone.
So if a family has only one additional dollar to put into savings, where would it go the furthest?
So with any client we say, what is your objective? If you are really looking to plan for your child's future and what they're going to do in terms of college or perhaps vocational school or something like that, a 529 plan 100% makes the most sense because again you're putting in after-tax dollars, it's growing tax-free and it's coming out tax-free.
The Trump Accounts work at the federal level. At the state level, Connecticut devised its own plan that gives children a jumpstart when they're born by contributing $3,200 to buy a so-called baby bond for the child. But there's a big difference. While the Trump Accounts are for all children, Connecticut's baby bonds are only available to those covered by the state's Medicaid system, inserting a redistribution factor into the equation. Erick Russell is the Connecticut State Treasurer.
The goal of the program is just very different than what we've seen out of the Trump Accounts. This program is designed to address wealth inequality in a long-term, big-picture way here in Connecticut. It is a program that is set right now to run at least 12 years, but our plan is to run that program in perpetuity.
Do you expect the savings and baby bonds to supplement existing assistance programs or perhaps even one day replace existing assistance programs?
