Sensitive times deal a heavy blow to the market: Amazon issues $15 billion in bonds, the "Big Four" have issued over $80 billion in bonds in two months, and Bank of America says "the best trade next year is to short cloud giants' bonds."

Sensitive times deal a heavy blow to the market: Amazon issues $15 billion in bonds, the "Big Four" have issued over $80 billion in bonds in two months, and Bank of America says "the best trade next year is to short cloud giants' bonds."

The "arms race" of tech giants investing in AI infrastructure is transmitting pressure to the capital market through an unprecedented surge in bond issuance.

According to media reports, on Monday Amazon launched its first US dollar bond issuance in three years, raising $15 billion in funds, $3 billion more than initially estimated. The issuance attracted peak demand of about $80 billion, showing the market’s enthusiasm for the tech giant.

This also means Amazon has joined the ranks of its peers—Alphabet (Google’s parent company), Meta, and Oracle—raising funds for massive AI-related capital expenditures through large-scale bond issuance. In just the past two months, the total bond issuance of the four largest tech giants has exceeded $80 billion.

This wave of AI-driven debt expansion is reshaping the supply and demand structure of the corporate bond market on one hand, and triggering Wall Street’s vigilance on the other. Bank of America has issued a warning, indicating that the loose financial environment supporting the AI boom is reaching a turning point. As global central banks slow down the pace of interest rate cuts, cracks are already appearing in the credit market, and shorting the bonds of these cloud service giants could be the “best trade” in 2026.

Amazon ramps up investment, capital expenditure soars

According to media reports, Amazon stated in an email response that the proceeds from this issuance will be “used to support business investments, provide funds for future capital expenditures, and repay maturing debt.” Goldman Sachs, J.P. Morgan, and Morgan Stanley are the lead underwriters for the issuance.

As the world’s largest cloud service provider, Amazon Web Services (AWS) is a key player in this wave of AI investment. To meet the surging demand for AI services, Amazon is significantly increasing its infrastructure investments.

Data shows the company’s capital expenditure in Q3 2025 soared 61% year-on-year, reaching $34.2 billion, bringing its total spending so far this year to $89.9 billion. According to Bloomberg’s compilation of analysts’ average expectations, Amazon’s capital expenditure next year is projected to exceed $147 billion, nearly three times the 2023 level.

In the most recent earnings call, CEO Andy Jassy revealed that since 2022, the computing power of Amazon’s data centers has doubled, and plans to double it again by 2027.

Earlier this month, Amazon signed a $38 billion agreement with OpenAI to provide computing power support with hundreds of thousands of Nvidia chips for the AI startup over seven years.

AI arms race sparks trillion-dollar bond issuance surge

To secure a leading position in AI, tech giants are engaging in an expensive competition centered on building data centers that can support AI model training and operation. In recent months, they have increasingly turned to the debt market, rather than using cash reserves, to fund these major construction projects.

Prior to Amazon’s issuance, Google parent Alphabet issued $25 billion in bonds earlier this month; Social media giant Meta issued $30 billion in bonds in October, making it the largest corporate bond issuance this year; and Oracle raised $18 billion through bond issuance in September.

The scale of this bond issuance wave is unprecedented. According to reports, US companies have already issued more than $200 billion in bonds this year for AI-related infrastructure projects. Goldman Sachs previously estimated that tech giants’ “enormous” bond sales have accounted for more than a quarter of net US corporate bond supply this year.

This AI-induced bond fervor is having direct market effects. Analysts warn that tech giants’ hundreds of billions in potential financing needs may “overwhelm” the debt market, bringing new risks for credit investors.

PGIM global bonds chief Robert Tipp pointed out, the sudden supply surge is creating market pressure and could significantly push up long-term bond yields. J.P. Morgan forecasts this fervor will drive US corporate bond issuance next year to a record-high $1.8 trillion.

BofA: Shorting cloud giant bonds could be the “best trade of 2026”

Wallstreetcn previously noted that despite strong market demand, BofA strategist Michael Hartnett believes the surge in AI-related debt is sowing risk. His core bearish logic is built on changes in financial conditions: over the past 12 months, global central banks have executed 167 rate cuts, creating a “large-scale easing” financial environment, but this momentum is ebbing, with rate cuts expected to plummet to 81 in the coming 12 months.

Hartnett pointed out that the main phase of the easing cycle is over and the peak of financial loosening usually corresponds with the bottom of credit spreads. Currently, the tech industry’s massive capital expenditure for the AI “arms race” exceeds what cash flow can support, causing bond spreads and credit default swaps (CDS) to widen, which he describes as “trouble in the parade”. For example, Oracle’s CDS recently spiked above 100 basis points.

Hartnett even cited a popular market saying to stress his point: “When the Fed implements quantitative easing (QE) again, you’ll know they’ll be buying the bonds of major AI cloud companies.” This implies the credit risk of these companies could eventually require central bank intervention.

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