Concerns about an AI bubble continue to grow, U.S. tech giants' bonds are being sold off, with Oracle bearing the brunt.

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Concerns over the massive investments by tech giants in artificial intelligence are spreading from the stock market to the bond market, which has traditionally been considered more stable.

Recently, there has been a sell-off of bonds issued by "hyperscale computing companies" in the market. The yield spread of a bond portfolio composed of “hyperscalers” such as Alphabet, Meta, Microsoft, and Oracle over risk-free U.S. Treasuries has climbed to 0.78 percentage points.

According to data from Bank of America, this spread level is not only higher than September’s 0.5 percentage points, but also the highest since April this year when market turmoil was triggered by Trump’s tariff remarks. A wider spread typically means investors are demanding higher compensation for risk, reflecting their increasing concerns over the credit risks of the bond issuers.

Massive Bond Issuance Triggers Leverage Concerns

The widening spread is driven by growing market attention to tech companies’ financing strategies. Despite being flush with cash, these giants are issuing bonds at an unprecedented pace to fund the construction of data centers and other AI infrastructure.

JPMorgan noted in a report that these “hyperscaler” companies collectively hold about $350 billion in cash and investments, yet they are still seeking substantial new debt in the credit market.

Recently, Meta, Alphabet, and Oracle have each completed bond issuances worth billions of dollars, with some bonds having maturities as long as 40 years. This move has led some investors to worry that these companies may be moving toward higher leverage levels.

Oracle Bonds Face Significant Pressure

In this round of sell-offs, Oracle’s bonds have been hit particularly hard. According to an index tracked in reports, since mid-September, the prices of some of Oracle’s outstanding bonds have fallen nearly 5%, while the broader US investment-grade tech bond index fell by only about 1% over the same period.

Data shows that Oracle’s long-term debt has reached about $96 billion. Rating agency Moody’s has warned that Oracle’s growth model relies on large commitments from a handful of AI companies, which poses significant risks.

However, some analysts believe that bond sell-offs following increased supply are a healthy market response. George Pearkes, a macro strategist at Bespoke Investment Group, said, “We are still in the early stages of the AI debt cycle.”

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