European Central Bank Warns US Tech AI Debt Risks

The European Central Bank warned that U.S. technology giants are increasing their issuance of euro zone bonds to fund artificial intelligence investments that could reach $1 trillion by 2028. Companies including Amazon, Alphabet, and Microsoft now account for nearly 10 percent of gross new issuance, with approximately €40 billion in outstanding euro zone bonds.

In a blog post, the central bank cautioned that this surge in debt may crowd out other borrowers and increase financing costs for both corporate and government sectors. The analysis suggests that passive investors tracking bond benchmarks may further pressure competing bonds, potentially creating a spillover effect into the sovereign and supranational segments of the bond market.

Additionally, the bank argued that current high credit ratings for these firms may rely on overly optimistic revenue and leverage assumptions. This trend could lead to the mispricing of credit risk, as the assumptions used by rating agencies may not stand the test of time.