Tech Hyperscalers Issue $400 Billion in Bonds for AI
Major technology firms are increasing debt issuance to fund AI spending, driving projected investment-grade bond totals to $400 billion by 2027.
Alphabet Inc., Amazon, Meta Platforms, Microsoft, and Oracle are significantly increasing debt issuance to finance massive artificial intelligence spending plans. This surge in supply is projected to reach approximately $250 billion in 2024 and $400 billion in investment-grade bonds by 2027.
The increased volume of bonds has pressured prices downward and pushed yields higher. Credit strategists from Goldman Sachs, Barclays, and Morgan Stanley observe that while these long-term bonds offer higher yields, they carry substantial inflation and interest-rate risks.
Due to these open-ended risks associated with AI models, analysts suggest a shift toward bonds issued by data-center construction firms. These securities, backed by real-estate investors such as Blackstone Group Inc. and Related Cos. and leased back to the hyperscalers, are viewed as a more attractive option for investors seeking higher yield spreads with more defined construction risks.
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