Wall Street Breakfast Podcast: Pop Goes The AI Bubble?

Download this episode on Apple Podcasts/Spotify or listen below:

Ray Dalio says rising rates could turn today’s AI frenzy into tomorrow’s reckoning. (00:14) Spotify (SPOT) is about to get a lot more audible. (01:23) Queso (CMG) with your coffee (SBUX)? (02:25)

This is an abridged transcript.

Ray Dalio has once again sounded the alarm on the AI bubble.

The billionaire investor is warning that the bubble is nearing the point where it may burst due to rising interest rates and increased borrowing to fund the AI infrastructure buildout.

He noted the huge amount of debt taken out to fund AI, and with rates expected to climb further, he said there’s a mounting risk that the bubble could pop.

Dalio on Tuesday told Bloomberg News that heavy borrowing to buy assets, or a potential wealth tax that requires selling assets to make money, can lead to a bubble bursting.

“What creates the bursting of a bubble is the fact that you need cash,” he said. “And you start to convert the wealth that you have to do that. Something like a wealth tax would have that effect, or having to pay back loans. So there’s that dynamic that we have to keep an eye on.”

The AI trade propelled the stock market to fresh highs this week, with the S&P 500 (SP500) and Nasdaq (COMP:IND) notching new closing records on Tuesday.

But these gains have largely been limited to stocks benefitting from the AI boom, while other sectors haven’t fared as well.

Audiobooks on Spotify are going global.

The digital audio streaming service announced Wednesday that, through the end of 2026, it will expand audiobook access from 22 markets to more than 180.

The expansion will bring Spotify audiobooks to more than 750 million people worldwide, giving listeners in new markets access to more than 350,000 titles. The expanded catalog will include books in Spanish, Portuguese, Italian, Polish and other languages, spanning more than 120 languages in total.

The move comes as demand for audiobooks accelerates. Monthly audiobook listeners grew nearly 40% over the past year, while listening hours increased by more than 30%.

Since launching its audiobook offering just over a year ago, Spotify says it has surpassed one million Audiobooks+ subscribers and generated more than $100M in annual recurring revenue.

Semafor is raising the possibility that Chipotle Mexican Grill (CMG) and Starbucks (SBUX) could merge and run operations similar to Yum! Brands’ (YUM) KFC, Pizza Hut, and Taco Bell.

Speculation as to the identity of an interested buyer was ignited last week following reports that Chipotle (CMG) enlisted bankers to fend off a potential takeover.

“[Starbucks CEO and former Chipotle CEO] Brian Niccol worked at Yum for more than a decade and understands that scale matters in razor-thin restaurant margins. And Starbucks could provide a platform to grow Chipotle’s nascent international business,” Semafor’s Rohan Goswami writes.

What do you guys think about queso with your coffee?

Catalyst watch:

• Neogen (NEOG) will hold an Investor Day event. The focus of the event will be on Neogen’s strategic transformation as the company provides additional details on its commercial prowess, high-impact innovation, and operational drive toward sustainable improvement in financial performance.

• Microsoft (MSFT) will hold its Windows and Surface event. The event is expected to focus on local AI in Windows and Surface devices, with possible updates on the Surface Laptop Ultra, Surface RTX Spark Dev Box, and Windows 11. Microsoft CEO Satya Nadella, Windows and Surface chief Pavan Davuluri, and Nvidia (NVDA) CEO Jensen Huang are expected to attend.

• Costco (COST) monthly sales report.

Stock index futures are in mixed territory.

Crude oil is up 0.1% at $89. Brent crude is up 0.8% at $101.

The FTSE 100 is down 0.3% and the DAX is down 0.8%. China’s (SHCOMP) markets closed.

Economic calendar:

• 2:00 pm FOMC Minutes

• 3:00 pm Consumer Credit