The scale of capital the AI buildout requires is starting to rival some of the biggest financing waves in modern market history, and BlackRock argues that dynamic is now colliding directly with heavy government borrowing to keep interest rates elevated. 

Annual financing demand in the US could approach $8 trillion by the end of the decade as AI infrastructure spending accelerates, competing for the same pool of capital that government debt issuance already strains. The Federal Reserve's first rate hike in three years helped restore some credibility to its inflation fighting stance. 

The firm remains constructive on risk assets overall, staying overweight US equities and AI exposure since companies with strong earnings and balance sheets have more room to absorb higher borrowing costs. In credit specifically, the preference is for attractive coupons positioned away from both the weakest borrowers and the companies issuing the largest amounts of debt.

Finsum: AI financing needs are colliding with heavy government borrowing to keep rates elevated.