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AI Boom Fuels Bond Market Surge
16 Jan
Summary
- AI companies are significantly increasing debt for data center and processor expansion.
- Hyperscaler bond issuance rose from $28 billion annually to over $121 billion last year.
- Oracle faces lawsuits over alleged failure to disclose AI infrastructure debt needs.
U.S. corporate bond issuance is projected to experience a substantial increase in 2026, with analysts pointing to the enormous build-out needs of AI hyperscaler companies as the primary catalyst. These technology giants are accelerating their spending and borrowing to expand data center presence and processor capacity. Last year, the five major AI hyperscalers collectively issued $121 billion in U.S. corporate bonds, a significant leap from the $28 billion average recorded annually between 2020 and 2024.
Analysts from Barclays forecast overall U.S. corporate bond issuance to reach $2.46 trillion in 2026, an 11.8% rise from the previous year. BofA Securities analysts anticipate that the Big Five hyperscalers will borrow approximately $140 billion annually over the next three years, potentially exceeding $300 billion each year. This surge in borrowing positions these tech firms as major players in the investment-grade bond market.
The rapid increase in hyperscaler borrowing has also led to widened credit spreads and a rise in the use of credit default swaps for hedging. Notably, Oracle faces lawsuits from bondholders alleging losses due to undisclosed debt needs for its AI infrastructure, highlighting potential risks associated with this market shift.
