Everyone loves a good tech bubble—until it pops. And according to Moody's Analytics Chief Economist Mark Zandi, we might be setting ourselves up for a much messier burst than the last time around.

The Debt Problem That Wasn't There Before

In a warning posted on X over the weekend, Zandi laid out why the current AI frenzy looks different from the dot-com era in one crucial way: debt. The top 10 AI companies are on track to issue a staggering $120 billion in bonds this year, and that leverage creates a risk profile that could damage far more than just investor portfolios.

Zandi isn't dismissing AI's potential. He acknowledges that artificial intelligence could "significantly boost productivity" and improve living standards over the long haul. The problem is what happens between now and then. Stock prices are already pricing in that rosy future, while companies are making what he calls "massive (over) investments" in data centers and infrastructure to get there.

But here's the kicker: they're doing it with borrowed money.

Why This Isn't Your Parents' Tech Bubble

The economist's main point is simple but important. When the Y2K bubble imploded around 2000, the damage stayed relatively contained. "The broader economic damage was limited as the losses were borne by equity investors," Zandi wrote. "There wasn't a lot of debt. That's not the case with the AI boom."

The data backs him up. Tech giants including Microsoft Corp. (MSFT), Meta Platforms Inc. (META), Amazon.com Inc. (AMZN), and Nvidia Corp. (NVDA) have dramatically ramped up their borrowing. Bond issuance in 2024 and 2025 has surged compared to the relatively modest levels seen in 2022 and 2023, suggesting these companies are leveraging their balance sheets hard to fund AI's voracious appetite for capital.

When you're funding a spending spree with equity, the worst that happens when things go south is that stock investors lose money. They're supposed to take that risk—that's literally the deal. But when you're funding it with debt, the pain spreads. Bondholders get hurt. Credit markets tighten. Banks get nervous. And suddenly you've got a problem that affects the whole economy, not just the people who bought tech stocks at inflated prices.

The Tangled Web of AI Money

Zandi also pointed to what he diplomatically called "incestuous financial relationships" between major AI firms. These interconnections mean that if one domino falls, others could follow in ways that are hard to predict.

The concern isn't just about individual companies stumbling—it's about systemic risk. If the AI bubble bursts, the damage won't stop at falling stock prices. It could ripple through credit markets, making it harder and more expensive for all kinds of companies to borrow money, which is exactly the kind of broader economic damage that didn't happen when the dot-com bubble popped.

Investment Options in the AI Space

For those still interested in exposure to AI-related investments, here are some exchange-traded funds that focus on the technology sector:

The takeaway? AI might well transform the world. But if we're financing that transformation with mountains of debt, the ride could get bumpy in ways that affect everyone, not just the people placing bets on tech stocks.