Bond issuance approaches historic highs! AI infrastructure burns cash rapidly, pushing total U.S. corporate debt to $1.7 trillion.

Bond issuance approaches historic highs! AI infrastructure burns cash rapidly, pushing total U.S. corporate debt to $1.7 trillion.

Driven by the surge in financing needs for artificial intelligence infrastructure construction, the scale of investment-grade corporate bond issuance in the United States has reached $1.7 trillion this year, closing in on the historical record set during the COVID-19 pandemic in 2020.

Led by major tech groups such as Meta, Alphabet, Amazon, and Oracle, large-scale use of the bond market is underway to fund the construction of massive data centers and supporting energy systems. Data from Goldman Sachs shows that AI-related borrowing now accounts for about 30% of net issuance of U.S. investment-grade bonds. While there are growing concerns in the market over the rising debt levels among “hyperscale computing enterprises” in AI, this financing trend is expected to continue growing through 2026.

With the wave of “AI bond issuance” approaching, investor attitudes have begun to diverge. Previously, benefitting from eased trade tensions and a rebound in risk assets, the borrowing cost of top U.S. companies relative to U.S. Treasury bonds briefly dropped to 0.74 percentage points in summer, the lowest since the end of the last century. However, as investors have become wary due to the flood of AI-related bonds entering the market, this spread has recently edged back above 0.8 percentage points.

The market widely anticipates that bond issuance activity will become more frequent in the future. In addition to the financing needs for AI construction, over $1 trillion in debt will mature annually over the next three years; combined with active M&A channels, the demand for large-scale refinancing and acquisition financing may push bond issuance volumes to historical highs in 2026 and beyond.

The Financing Frenzy Nearing Historic Peaks

According to tracking data from industry association Sifma as of the end of November, U.S. companies have sold $1.7 trillion in investment-grade bonds this year, a figure quickly approaching the $1.8 trillion record set in 2020. Unlike 2020, when companies raised funds to shore up their balance sheets against the shocks of the pandemic, this year’s bond boom is mainly driven by aggressive capital expenditures.

Erin Spalsbury, head of U.S. investment-grade bonds at Insight Investment, stated:

“This is just the tip of the iceberg. It’s very certain that we’ll see more issuance next year, and the market is preparing for it.”

JPMorgan previously estimated that by 2030, the AI sector alone will need $1.5 trillion in loans to support its construction requirements.

Despite the massive scale of borrowing, market doubts over the return cycle for AI investments are causing asset price volatility. The current revenue growth of some tech firms has failed to match their aggressive borrowing, as seen in Oracle’s latest quarterly report, where revenue fell short of expectations but data center spending exceeded predictions.

This mismatch in fundamentals has triggered selloffs in tech sector stocks and bonds. Investors worry that if returns brought by the AI boom do not materialize quickly enough to cover surging debt, the current borrowing frenzy might turn into a credit crisis. Such concerns have been directly reflected in pricing. Hans Mikkelsen, U.S. credit strategist at TD Securities, predicts that as additional issuance puts pressure on investor appetite, the borrowing cost for top corporations relative to Treasuries could rise by about 0.2 to 0.3 percentage points next year.

Potential Bond Issuance Peak in 2026

Looking ahead, structural factors in the market will further drive up bond issuance. Dan Mead, head of investment-grade syndicate at Bank of America, points out that within the next three years, over $1 trillion in debt will mature annually, forcing companies to conduct large-scale refinancing deals. Additionally, active M&A activity will also prompt companies to issue sizable bonds to fund acquisitions.

Dan Mead stated:

“We expect 2026 will be just as busy and could potentially become the biggest year ever for investment-grade bond issuance.”

This forecast indicates that, although financing volumes are already high, driven by AI infrastructure, debt rollover, and M&A activity, short-term supply pressure in the U.S. corporate bond market is unlikely to ease.

In the face of potential risks, some investors have begun to take defensive measures. In a report, Hans Mikkelsen pointed out that next year’s financing demand from the tech industry will be so large that life insurance companies—major buyers of long-term bonds—might exceed their internal exposure limits for single bond issuers.

Trading data from the derivatives market also confirms rising anxiety in the market. According to DTCC clearinghouse data, since early September, the trading volume of single-name credit default swaps (CDS) linked to several major U.S. tech groups has surged by about 90%. In particular, prices of Oracle’s CDS hit their highest since 2009 earlier this month. Investors are buying such derivatives to hedge against the tail risk that the AI boom could turn into a credit collapse.

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