AI infrastructure financing has driven the issuance of investment-grade corporate bonds in the U.S. to approach $1.7 trillion. Giants such as Meta and Oracle have aggressively borrowed, with AI-related financing accounting for 30% of net issuance. Facing a maturity peak in 2026 and merger and acquisition demands, the market anticipates that issuance will reach new highs. However, concerns over returns have also raised worries about credit default risks.
Driven by a surge in financing needs for artificial intelligence infrastructure, U.S. investment-grade corporate bond issuance has reached $1.7 trillion this year, approaching the all-time high set during the 2020 COVID-19 pandemic.
For example, $Meta Platforms (META.US)$、$Alphabet-A (GOOGL.US)$、$Amazon (AMZN.US)$and$Oracle (ORCL.US)$Large technology conglomerates are aggressively tapping the bond market to finance the construction of massive data centers and accompanying energy systems. According to Goldman Sachs, AI-related borrowing currently accounts for approximately 30% of net issuance in the U.S. investment-grade bond market. Despite concerns over the rising debt levels of 'hyperscale computing firms' driven by AI, this financing trend is expected to continue growing through 2026.
As the wave of 'AI-related bond issuance' intensifies, investor sentiment is beginning to diverge. Previously, easing trade tensions and a rebound in risk assets had lowered borrowing costs for top-tier U.S. companies relative to U.S. Treasuries to 0.74 percentage points during the summer, marking the lowest level since the late 1990s. However, as investors grow cautious due to the influx of AI-related bonds into the market, the spread has now risen slightly above 0.8 percentage points.
The market widely anticipates that bond issuance will become even more frequent in the future. In addition to funding demands for AI infrastructure, over $1 trillion in debt will mature annually over the next three years, coupled with active merger and acquisition pipelines. The combination of large-scale refinancing and acquisition financing needs could push bond issuance beyond historical peaks in 2026 and beyond.
A Financing Surge Approaching Historical Peaks
According to data tracked by the industry association Sifma as of the end of November, U.S. companies have sold $1.7 trillion in investment-grade bonds this year, rapidly approaching the record of $1.8 trillion set in 2020. Unlike in 2020, when companies raised funds to strengthen their balance sheets amid the impact of the COVID-19 pandemic, this year's bond issuance boom is primarily driven by aggressive capital expenditures.
Erin Spalsbury, Head of U.S. Investment-Grade Bonds at Insight Investment, stated:
"This is just the tip of the iceberg. It is highly certain that we will see more issuance next year, and the market is preparing for it."
JPMorgan previously estimated that the AI sector alone will require $1.5 trillion in borrowing by 2030 to support its infrastructure needs.
Despite the significant borrowing scale, doubts about the return on AI investments are triggering volatility in asset prices. Some tech companies' current revenue growth has not matched their aggressive borrowing levels. For instance, Oracle's latest quarterly earnings report showed weaker-than-expected revenues but higher-than-expected spending on data centers.
This fundamental mismatch has triggered a sell-off in both stocks and bonds within the technology sector. Investors are concerned that if the returns from the AI boom cannot materialize quickly enough to cover the surging debt, the current borrowing spree could evolve into a credit crisis. This concern has directly impacted pricing, with TD Securities US Credit Strategist Hans Mikkelsen forecasting that top-tier companies’ borrowing costs relative to Treasury bonds may rise by approximately 0.2 to 0.3 percentage points next year as additional issuance strains investor appetite.
New Debt Issuance Peak Expected in 2026
Looking ahead, structural factors in the market will further drive up debt issuance. Dan Mead, head of Bank of America's investment-grade syndicate, noted that over the next three years, more than $1 trillion in debt will mature annually, forcing companies to engage in large-scale refinancing transactions. Additionally, active mergers and acquisitions (M&A) activity will also prompt companies to issue substantial bonds to fund acquisitions.
Dan Mead said:
“We expect 2026 to be equally busy and potentially become the year with the highest issuance of investment-grade bonds.”
This forecast suggests that despite the already high levels of financing currently, the supply pressure in the US corporate bond market is unlikely to ease in the short term due to the triple drivers of AI infrastructure, debt rollover, and M&A activity.
In response to potential risks, some investors have begun taking defensive measures. In a report, Hans Mikkelsen pointed out that the financing needs of the technology sector next year will be so significant that life insurance companies, as primary buyers of long-term bonds, may exceed their internal risk exposure limits for single bond issuers.
Trading data from the derivatives market also confirms the rise in market anxiety. According to the Depository Trust & Clearing Corporation (DTCC), since early September, trading volumes in single-name credit default swaps (CDS) linked to a handful of U.S. technology groups have surged by about 90%. Among them,$Oracle (ORCL.US)$the price of CDS reached its highest level since 2009 earlier this month. Investors are purchasing such derivatives to hedge against the tail risk that the AI boom could turn into a credit crash.
Editor/melody