Avago, SanDisk among market cap stock movers on Friday

By Matt Wirz

Bond traders are showing signs of indigestion over the tens of billions of dollars they lent this fall to large tech companies, or hyperscalers, to pay for new artificial intelligence infrastructure. Mounting concerns of a potential AI bubble kicked into overdrive after Oracle disclosed earlier this week much higher-than-expected spending on costly chips, networking equipment and other capital expenditures.

Bonds issued by Oracle, Meta and Amazon dominated the corporate debt market this morning with about $1.4 billion of the securities changing hands, according to MarketAxess. The activity accounted for roughly 7% of the corporate bond market's trading volume.

Credit markets have served as a barometer of rising risk in past technology buildout cycles, most notably in the late 1990s and early 2000s when telecommunications companies built out fiber optic and satellite networks, according to research by Bank of America. Selloffs in telecom bonds preceded sharp corrections in stock prices by months, according to the research.

"Today's Hyperscalers, viewed in the same framework, look eerily similar to early-stage Telcos of '98," analysts at the bank wrote in a report Thursday.

Selling pressure is pushing up the yield premium over safer Treasury bonds, or spread, that investors demand to hold the newly issued hyperscaler bonds. The spread on Oracle's 5.95% bond due 2055 jumped 0.20 percentage point to 2.11 percentage points over Treasurys, according to MarketAxess. That is close to double the roughly 1.20 percentage points above Treasurys the bond traded at when Oracle first issued it in September.

Selling hit the debt of "neo-cloud" companies even harder. Neo-clouds, which purchase advanced microchips for installation in data centers and rent them out to AI companies, are especially exposed to market sentiment because they depend heavily on stock and bond investors for cash.

The spread on CoreWeave 9.25% bonds due 2030 that the neo-cloud issued in May jumped half a percentage point today to about 8 percentage points, according to MarketAxess. Its credit default swaps also soared to about 7.90 percentage points.

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By Connor Hart

Warehouse clubs such as Costco and BJ's Wholesale Club have long lured fee-paying members with supersized packages of food sold at lower per-unit prices.

Now, amid rising input costs and intensifying competition for shopper loyalty, they are leaning more heavily on private-label brands to undercut competitors and reinforce their value proposition for inflation-weary consumers.

Costco launched its Kirkland Signature brand three decades ago, and the private-label line has since become a linchpin of the retailer's success, accounting for about a third of its $254.5 billion in annual revenue.

Finance chief Gary Millerchip said Thursday that Kirkland continued to grow at a faster pace than overall sales during the company's latest quarter. The products typically offer up to 20% better value than comparable name brands, while providing equal or better quality, he added.

Ahead of the holiday season, Costco launched about 45 new Kirkland products, while also cutting prices on items such as chicken pot pies, slabs of bacon, packs of whipped cream and walnuts. The company is banking on lower prices and new offerings to appeal to consumers increasingly frustrated by higher grocery bills.

Jefferies analysts said in a research note that higher Kirkland penetration, along with supply-chain improvements, helped improve Costco's margins in the quarter.

"As always, our goal is to be the first to lower prices where we see opportunities to do so," Millerchip said on a call with analysts.

Other warehouse clubs and major retailers are responding to similar trends. As consumers cut spending on groceries and increasingly trade down to lower-priced goods, store brands have gained market share, putting pressure on large packaged-food companies that have raised prices in recent years.

BJ's Wholesale Club said last month that it plans to ramp up its private-brand strategy as members gravitate toward promotions and cheaper store-brand alternatives. The retailer introduced private-label products such as tortilla chips, protein shakes and coffee makers during its latest quarter, which it said cost about 30% less than comparable name brands.

"Owned-brand products also deliver higher penny profit for us, which we can use to invest back into the member experience, further propelling the flywheel that drives our business," Chief Executive Bob Eddy said.

Walmart is boosting investment in its in-house brands, including last year's launch of Bettergoods, a food line with trendy flavors and more natural ingredients. Its warehouse banner, Sam's Club, also markets its own private-label brand, Member's Mark.

And Amazon.com earlier this year debuted a new private label food brand called Amazon Grocery, combining products currently sold under the e-commerce company's Amazon Fresh and Happy Belly brands.

Write to Connor Hart at connor.hart@wsj.com