Treasury Secretary Scott Bessent has spent months pitching AI as the engine of America's next economic boom. His own analysts think it might blow up the economy.
NOTUS obtained an internal Treasury report that warns the current AI investment boom is starting to look a lot like a bubble, and that when it pops, the fallout could hit corporate spending, retirement accounts, and financial stability more broadly. The document reflects the view of Treasury career staff, which makes the contrast with Bessent's public messaging awkward.
Just weeks ago in a New York address, Bessent compared this moment to the dotcom era and asked, "Could we do at least that? Can we do maybe more?" Asked about the internal report, a Treasury spokesperson told NOTUS that "the official position of the Secretary and the U.S. Treasury is that Artificial intelligence will be a key driver of America's new Golden Age." The analysts writing the report work for the person the spokesperson is defending.
The report itself isn't really about hype. It's about the money, and the math doesn't work yet:
- The spending gap: AI and Big Tech companies are on track to spend nearly $3 trillion on data center buildouts by 2028, but only about $1.4 trillion will come from their own cash flow. The remaining $1.6 trillion has to come from somewhere.
- Where it's coming from: Roughly $800 billion is projected to come from private credit, an opaque corner of finance that regulators have limited visibility into. Another $150 billion is expected through asset-backed securities, with the rest split across private equity and traditional bonds.
- The revenue problem: AI companies spent an estimated $400 billion on infrastructure in 2025 and brought in about $60 billion in revenue. OpenAI alone is running at roughly $20 billion annualized against the $500 billion it says it needs.
That mismatch is why analysts outside Treasury are starting to sound a lot like the ones inside it. Fed Vice Chair Philip Jefferson noted in November that leverage in the AI sector could rise sharply if debt keeps filling the gap, and that losses in a downturn would grow with it. The Bank of England went further in December, warning that the deeper ties between AI firms and credit markets mean a correction in asset prices could spill directly into the broader financial system.
Stress signals are already showing up. CoreWeave, one of the most aggressive borrowers in the space, has taken on more than $14 billion in debt, and the cost of insuring against its default has climbed from about 360 basis points to 640 in two months. Oracle's credit default swap volume ballooned from under $200 million a year ago to about $4.2 billion over a six-week stretch, the highest level since 2009. Even Microsoft, a AAA-rated company that usually doesn't move on this stuff, has seen its default protection cost nearly double since the summer.
The people building the models aren't exactly denying that something is off. Mark Zuckerberg said in September that "if we end up misspending a couple of hundred billion dollars, I think that that will be very unfortunate obviously." Sam Altman told the Financial Times "some investors are likely to lose a lot of money." Sundar Pichai went on the BBC and admitted to "irrationality" in the current boom. When the CEOs at the top of the trade are hedging in public, the conversation in private tends to be louder.
We wrote earlier this month about Senator Warren pressing FSOC to look at exactly these risks. What's different here is who's raising the flag. The people writing this warning report to Bessent.
The interesting thing about bubbles is that everyone can see them before they pop, and no one wants to be the person who called it early. Bessent's own analysts just did, quietly, on paper, and got publicly overruled by the boss the same week. If the report turns out to be wrong, nobody will remember it. If it turns out to be right, the awkward part isn't that Treasury saw it coming. It's that the Treasury Secretary spent that same stretch telling everyone to lean in harder.
