AI investment ignites financing boom, global convertible bond issuance hits 24-year high

The artificial intelligence boom is reshaping the global financing market at unprecedented speed, driving companies to raise huge sums by issuing convertible bonds. According to data from BofA Global Research, propelled by AI-related spending, global convertible bond financing in 2025 will soar to about $166.5 billion—setting a new 24-year high since 2001 and approaching the all-time record.

The core momentum behind this financing surge comes from companies’ massive investment in AI infrastructure and related technologies, with firms including Alibaba, Lumentum Holdings, and Super Micro Computer using convertible bonds to fund their AI bets. In addition to the explosive issuance, convertible bonds—a hybrid asset class with both debt and equity features—have seen 2025 returns outpace large-cap stocks and traditional bonds after years of sluggish performance, marking a strong rebound.

Market analysts note that the capital-intensive nature of the AI industry is forcing companies to seek lower-cost financing channels, making convertible bonds a top choice due to their lower interest expenses. Against a backdrop of potentially prolonged high interest rates and surging share prices, mature companies’ demand for refinancing through convertibles has also increased substantially.

Ivan Nikolov, head of convertible bonds at Swiss asset manager Fisch, said both issuance volume and performance make 2025 a “landmark year” for this asset class. The market widely expects this momentum to continue into 2026, with strong activity in Asia and an upcoming wave of debt maturities supporting ongoing issuance.

The AI-driven financing engine

As the main driving force in this financing wave, AI-related companies are increasingly dominating the convertible bond market. From semiconductors and infrastructure to software and power, companies within the AI ecosystem not only account for massive issuance but are also the main sources of investment return. According to Ivan Nikolov, about 40% of last year’s benchmark convertible bond index returns were driven by AI-related companies.

Specific cases show that data center photonics supplier Lumentum, infrastructure provider Super Micro, and AI cloud computing firm CoreWeave all raised billions of dollars. Even cryptocurrency miner Bitfarms Ltd. turned to convertibles to fund its shift towards AI and high-performance computing. Joe Wysocki, Senior VP and Portfolio Manager at Calamos Investments LLC, noted this may be one of the better growth opportunities in all capital markets, and is likely to continue leading the convertible bond market for some time.

Refinancing demand and the entry of mature companies

Apart from emerging technology, the pressure to refinance maturing debt is another key factor fueling the market’s revival. Nicolas Cremieux, head of convertibles at Mirabaud Asset Management, pointed out that about a quarter of outstanding convertibles will mature in the next two years, laying the foundation for ongoing market activity.

Furthermore, with expectations of prolonged high rates and rising stock prices, mature companies are reevaluating the appeal of convertible bonds. This financing tool allows companies to borrow at lower interest costs, and although potential conversion could dilute equity, it remains advantageous in the current environment. Recently, European firms such as Germany’s Lufthansa, Ferrovial SE, and Euronext have entered the market, with Lufthansa successfully closing a zero-coupon bond deal.

The rise and resilience of Asian markets

While North America remains the primary convertible bond market, Asian markets have played a key role in the recent recovery.

Alibaba raised $3.2 billion via a convertible bond offering in September, while insurance giants China Pacific Insurance and Ping An each raised $2 billion and $1.5 billion, respectively. Damon Carter, Head of Convertibles at Daiwa Capital Markets Europe, believes that with a healthy stock market and stabilizing rates, Asian markets will provide even more opportunities in 2026, with convertibles gradually becoming a mainstream financing tool in the region.

Despite market caution about the sustainability of AI spending, believing a reversal could significantly impact convertibles, the asset class has shown resilience to volatility. Bloomberg data shows that during last year's market swings, the Bloomberg Global Convertible Bond Index declined less than the MSCI World Index.

Nicolas Cremieux stressed that during uncertain times, investors tend to seek solutions with asymmetric return potential, making convertibles an indispensable asset class.

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