US Tech AI Spending Shifts Global Bond Risk Hierarchy

Major US technology firms have borrowed more than $600 billion globally to fund capital expenditures for artificial intelligence. This massive surge in borrowing is reordering the global risk hierarchy for bond investors, as the volume of issuance from US hyperscalers increases risk premiums on their debt.

Chase Bank index data shows that risk premiums on emerging-market corporate debt indexes have converged with US benchmarks. The difference between the two has shrunk to a few basis points, a significant drop from the historical average of 30 to 50 points. Consequently, investors increasingly view corporate debt from wealthier Asian economies as safer alternatives to some US tech giants.

Specific market shifts illustrate this trend. Bonds from Taiwan Semiconductor Manufacturing Co. now trade at lower yields than equivalent notes from Meta Platforms Inc. Similarly, 2031 bonds from SK Hynix yield only nine basis points more than those of Amazon.com Inc., while Tencent bonds offer yields similar to those of Apple Inc. While some analysts believe this convergence has gone too far, others argue the shift is justified by the orderly supply of emerging-market investment-grade debt.