Credit market hit with $200bn ‘flood’ of AI-related issuance

US companies have issued more than $200bn worth of bonds to finance huge artificial intelligence-related infrastructure projects this year, as analysts predict the splurge will “flood” the broader market and store up new debt risks for credit investors.

The tech giants that provide the cloud computing on which the internet is run at first financed their huge investments in data centres and related infrastructure primarily through their strong earnings and hefty balance sheets.

But they have increasingly begun to tap debt markets to cover the mounting upfront costs of colossal new AI data centres, particularly as returns from the technology are still years away.

Mark Zuckerberg’s Meta sold $30bn of bonds this week to finance its AI projects. The sale was highly oversubscribed with about $125bn of orders, the largest ever demand in dollar terms for a US investment-grade corporate bond, according to two people close to the deal.

Goldman Sachs had previously estimated that the $180bn worth of “jumbo” bond sales by the likes of Meta, Alphabet and Oracle meant AI-related issuance accounted for more than a quarter of all net supply of US corporate debt this year.

“The highly rated tech issuers’ huge appetite for debt to fund AI investment will divert demand from other areas of the corporate credit markets,” said Gordon Shannon, a fund manager at TwentyFour Asset Management.

Oracle sold $18bn of bonds in September — also in a highly oversubscribed deal — to help pay for the development of data centres it has leased to provide computing power to OpenAI.

“These companies that have committed to huge builds for basically one customer are going to have to raise expensive capital,” said Gil Luria, head of technology research at DA Davidson.

“The bonds we’re seeing at the moment haven’t been too expensive because of the point of the cycle we’re at, but the companies are going to need hundreds of billions of dollars more.”

He added: “If the markets end up investing hundreds of billions of debt in rapidly depreciating assets that may not have sufficient returns, the risk could become systemic.”

In a note on Friday, analysts at Barclays said that while “the AI wave has not been a major driver of supply in our market . . . several deals this year show the potential to shift this picture dramatically”, adding that such issuance was the “largest elephant in the room” for many investors.

“Surging capex volumes could finally break the dam and lead to a flood of issuance that we have not previously forecast,” they added.

Senior fund managers said the wave of sales would force fixed-income investors to reckon with the same questions as stock investors about the sustainability of the AI spending boom.

Fraser Lundie, global head of fixed income at Aviva Investors, said the surge in issuance raised “important questions about concentration risk [and] capex sustainability”. He added that it could increase the broader US investment-grade credit market’s sensitivity to interest rates, given the long duration of the bonds being sold by the tech groups.

Goldman’s analysts called 2025 “a banner year for AI-linked net issuance” and predicted that the streak of bond sales to finance data centres and related energy infrastructure would continue in 2026.

The groups are issuing at a time of rampant demand for corporate credit, which earlier this year sent US credit spreads to their lowest level this century.

“This pick-up in issuance is occurring at a time when inflows into the asset class remain firm, helping to absorb new paper,” said Jason Borbora-Sheen, a portfolio manager at asset manager Ninety One.

Other fund managers warned of the broader risks of funding the next leg of capex through the capital markets, rather than companies’ own cash generation, if fears of an AI “bubble” were realised.

“If this leaves much more bad debt in the system, it could have more negative consequences,” said Kevin Thozet, a member of the investment committee at Carmignac.

“And to make things even more tricky, some of it is financed through private debt, so it’s quite opaque.”

Additional reporting by Robert Smith in London