Tech giants boost AI spending with surge in corporate bond issuance

U.S. technology companies are increasingly financing their AI expansion through the bond market, contributing to a 30% rise in corporate bond issuance year-to-date. Data from the Securities Industry and Financial Markets Association show that U.S. issuers have sold $1.9 trillion in bonds through August, while the Institute of International Finance reports global AI-linked bond issuance has already exceeded $400 billion this year, with an annualized pace above $500 billion. About 90% of that volume originates from U.S. firms such as Alphabet, Amazon, Meta, Microsoft and Oracle, which together are projected to spend $800 billion on capital expenditures this year and $1.2 trillion next year, according to Goldman Sachs.

The surge in debt raises questions about its impact on broader bond markets. Treasury yields have risen to their highest levels since 2007 for the 10-year and 2004 for the 30-year, prompting comments from Federal Reserve officials. > "The so-called hyperscalers are out in the market raising funding," Federal Reserve Chairman Kevin Warsh said, adding that competition for capital is real and may partly explain the yield increase.

Analysts note that AI-related bonds are typically longer-dated, while recent Treasury issuance has focused on shorter maturities, limiting direct competition. Vishwas Patkar, head of U.S. credit strategy at Morgan Stanley, said investors in Treasury securities and those buying hyperscaler bonds tend to be distinct groups, and the share of global non-financial corporate bond issuance has stayed broadly stable. Asset manager PIMCO also found no statistically significant rise in 10-year Treasury yields linked to recent large AI debt offerings. Nonetheless, the scale of AI-driven borrowing could exert upward pressure on rates even without a direct crowding-out effect.