AI "bottomless pit"! Amazon issues another $25 billion in bonds, AI-themed bonds sold off across the board

AI infrastructure arms race is pushing the balance sheets of tech giants to historic extremes, triggering alarms in the bond market. On Tuesday, Amazon launched a new round of $25 billion US dollar bond issuance. Following the announcement, AI-related bonds experienced massive sell-offs. The spread on bonds issued by mega-scale cloud computing companies such as Meta and Amazon widened sharply in a single day—falling far beyond the normal fluctuation range of the investment-grade market. According to Bloomberg data, if this issuance proceeds smoothly, it will push the total global sales of AI-related bonds this year to a record-high $335 billion, more than doubling the scale of all of 2025. Meanwhile, Goldman Sachs has already issued warnings to clients last weekend, advising them to proactively hedge against the risk of a debt bubble among mega-scale cloud computing companies. The core market concern is: the “bottomless pit” nature of AI capital expenditures is eroding the credit quality of tech giants at an unprecedented pace. According to Morgan Stanley, the overall leverage ratio of mega-scale cloud companies surged from 0.9x in Q3 2025 to 1.8x currently—doubling in just two quarters, surpassing even the leverage levels of the energy sector, with a growth rate of about 0.3x per quarter. John Lloyd, Global Head of Multi-Sector Credit at Janus Henderson, pointed out that portfolio holdings in mega-scale cloud computing firms are already highly concentrated. New bond issuances must offer enough pricing concessions to attract investors to further increase their holdings. Amazon Sweeps the Bond Market Again; Single Issuance Hits New Yearly High Amazon's bond issuance is divided into up to eight maturities, ranging from 3 to 40 years. The longest, maturing in 2066, has an initial price guidance of about 145 basis points over US Treasuries. Underwriters are Barclays, Goldman Sachs, JP Morgan, and Morgan Stanley. The funds will be used for general corporate purposes, including debt repayment, mergers and acquisitions, and capital expenditures. This marks another large-scale fundraising by Amazon this year. In March, Amazon issued $37 billion in US dollar bonds—the fourth largest single US corporate bond issuance in history—and simultaneously issued €14.5 billion in euro bonds. Subsequently, it also completed issuances in Swiss francs and Canadian dollars. According to Bloomberg, since last year, Amazon has raised about $82 billion through high-rated, multi-currency bonds, while its expected capital expenditure for this year is nearly $200 billion, leaving a substantial funding gap. This issuance will complete Amazon's US dollar financing plans for 2026; any future dollar bond issuances will be opportunistic. However, analysts generally believe that this does not mean Amazon’s overall bond issuance is coming to an end. AI Bond Spreads Widen Sharply in a Single Day, Market Selling Pressure Intensifies After Amazon announced its new bond issuance, the AI-related bond secondary market promptly came under pressure. According to MarketAxess, Meta’s 2056 maturity, 6.3% coupon bond widened by about 8 basis points in a single day; Amazon’s 2066 maturity, 5.95% coupon bond widened by about 14 basis points. By comparison, spreads for high-rated corporate bonds typically move only a few basis points on normal trading days. John Lloyd commented that the broad weakening of mega-scale cloud company bonds mainly reflects investors reallocating funds to participate in Amazon’s new bonds, rather than any substantial change in credit fundamentals. However, he also noted that investors are increasingly questioning how much additional debt the industry will need to raise for AI infrastructure financing over the coming years. SpaceX’s $25 billion bond issuance in June also was not spared, with related bonds caught up in this wave of selling. According to BondCliQ statistics, Amazon, Microsoft, Alphabet, Meta, Oracle, and Nvidia—the six main players in the AI race—have issued over $460 billion in bonds in recent years, including about $100 billion issued this year. Echoing bond market volatility, the credit default swap (CDS) market is also seeing marked swings. Oracle's CDS spreads are widening rapidly; Coreweave and SpaceX's CDS are showing similar trends. The credit market is starting to reassess the risk pricing of AI-related names. Oracle’s share price has dropped nearly 50% from its June 2 peak, falling to its lowest level since 2026, and is seen as a typical case of pressure on highly leveraged AI concept stocks. Morgan Stanley data shows the overall leverage ratio of mega-scale cloud computing companies is rising at a pace alarming to the market—from 0.9x to 1.8x in just two quarters, with no sign of slowing. This trend is highly similar to the credit tightening seen at the end of 2025 and again in March 2026, when technology CDS surged dramatically, causing a debt-driven capital expenditure wave to come to a standstill. Goldman Sachs Issues Warning, Advises Clients to Hedge Bubble Risks Facing accumulating risks, Goldman Sachs trader Adam Crook released a report last weekend to clients, recommending proactive hedging strategies to address possible market shocks triggered by continued expansion of mega-scale cloud company debt. Crook’s report pointed to the following scenario: equity markets keep hitting record highs while credit markets struggle to rise further from historically tight valuations—large supply pressure will continue to suppress credit spreads, and high interest rates also pose refinancing challenges for existing issuers, especially lower-rated borrowers. Crook emphasized that if a macro shock occurs—such as major new information challenging the bullish AI logic or capital expenditure plans—those segments of the credit market at historically low spread levels will offer asymmetric return and convexity characteristics for macro or multi-asset portfolios as risk hedges. Notably, public debt market data may only be the tip of the iceberg for the AI capital expenditure wave. According to ZeroHedge, there is an undisclosed off-balance-sheet exposure of up to $1.8 trillion, which constitutes a potential systemic risk. Currently, AI-related bond spreads have been wider than the overall US investment-grade corporate bond market for several months. As mega-scale cloud companies’ financing demands keep breaking new highs, bond investors face increasing uncertainty in pricing this “bottomless pit” AI arms race. Risk Disclosure and Disclaimer The market carries risks; investment should be approached cautiously. This article does not constitute personal investment advice, nor does it consider the specific investment goals, financial situation, or needs of individual users. Users should assess whether any opinion, viewpoint, or conclusion in this article suits their specific circumstances. Investments made according to this article are at the user’s own risk.