Triple whammy

Good afternoon, ladies and gents. We’re marking the midpoint of the week with two things: The war’s reach into our own calendar, and the IMF putting a number on how the AI build-out is being paid for.

Riyadh’s King Khalid International will stay shut until this Saturday, 17 October, and the disruption is starting to trickle elsewhere in the Gulf. Air France has pushed back Dubai flights to the end of the month, alongside delays on its Riyadh services. The Airport Show at DWTC, which closes today, has been noticeably quiet this week, with fewer agreements coming off the floor than usual. Reuters has moved its Reuters NEXT Gulf conference from 21 October to October 2027, citing the need to align with other regional events and build out a fuller program. These event calendar shifts come as Saudi Arabia is looking to press ahead with its own calendar as normal, as its Future Investment Initiative conference is scheduled for later this month.

The IMF has named surging government bond yields the top risk to the financial system, warning of a disorderly spike as record debt, sticky inflation and AI borrowing collide, according to its Global Financial Stability Report. Hyperscalers now account for 10% of global investment-grade bond issuance, up from under 1% in 2024, and that longer-dated paper competes with government bonds for the same investors.

Since 2023, 14 disclosed transactions have channeled some USD 300 bn of equity, mostly from hyperscalers, and USD 650 bn of debt into weaker AI firms, in return for USD 1.4 tn of future revenue commitments. “The equity investments will deplete in value, the debt may be difficult to service,” the fund’s Jason Wu said, calling the combination a “triple whammy.”

Meta is shopping exactly that structure. The company says its Muse Wonder model, out on Monday, has reached the AI “frontier” on “a large amount of compute and investment,” with more spending to come, Mark Zuckerberg told the Financial Times. It is planning “tens of gigawatts this decade” and hired Dina Powell McCormick in January to court governments and sovereign investors as partners. Funds managed by Blue Owl Capital already own 80% of the joint venture behind its USD 27 bn Hyperion data centre, and Meta is one of eight US firms cleared to receive advanced US chips in the UAE. The pockets being courted include the ones in this region. –Salma