Technology IPO expectations are heating up, but has Wall Street's main battleground shifted to the bond market?

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Although the IPO prospects of star companies like SpaceX and OpenAI have attracted much attention, the real focus of the current U.S. technology capital market has shifted to debt financing. To support the rapid expansion of AI infrastructure, the global scale of technology and AI-related bond issuance is rapidly swelling, and is expected to approach the $1 trillion mark this year from $710 billion in 2025.

Alphabet, Amazon, Meta, and Microsoft—the four major tech giants—are expected to see combined capital expenditures and financing leases reach $700 billion this year to meet the epic-level demand for computing power resources. To fill the funding gap, leading companies are entering the bond market intensively: Alphabet completed over $30 billion in bond issuance this week, and Oracle announced in early February it would raise $45-50 billion this year, quickly launching a $25 billion bond sale.

Morgan Stanley estimates that there is about a $1.5 trillion financing gap in the AI infrastructure sector, most of which will be filled by the debt market. Analysts warn that as the scale of tech companies' bond issuance continues to climb, the weight of the tech sector in investment-grade corporate bond indexes may rise from the current 9% to double digits, increasing concentration risk at the index level; meanwhile, the massive supply may also push up financing costs for issuers from other sectors, creating a cross-market spillover effect.

Mega-scale Financing Fuels Bond Market Expansion

UBS estimates that global technology and AI-related debt issuance will more than double year-on-year in 2025, reaching $710 billion, and may further approach $990 billion in 2026. Chris White, CEO of bond data service BondCliQ, pointed out that the corporate bond market is experiencing a "huge supply" shock, with unprecedented scale expansion.

Oracle and Alphabet are leading this round of bond issuance, and more tech giants are signaling new financing moves. Amazon last week filed a mixed shelf registration, hinting at potential equity and debt financing combined. Meta's CFO Susan Li stated at the earnings call that the company would "carefully assess the cost-effectiveness of external financing to supplement cash flow, and may eventually maintain a positive net debt balance." Tesla CFO Vaibhav Taneja also said after the Q4 earnings report that, as infrastructure investment proceeds, the company "does not rule out seeking external funding through debt or other methods."

The U.S. IPO Market Remains Lackluster

In stark contrast to the debt financing boom, the U.S. tech IPO market remains subdued. No well-known tech firms have filed for listing so far this year, with the only remaining anchor for expectations concentrated on Elon Musk’s capital moves.

Last week, Musk merged SpaceX with AI startup xAI to form a new entity valued at $1.25 trillion. Although reports suggest SpaceX may pursue an independent IPO by mid-2026, investor Ross Gerber, CEO of Gerber Kawasaki, believes Musk is more likely to integrate it with Tesla than take it public separately.

OpenAI, Anthropic, and other AI stars with hundred-billion-dollar valuations have not finalized their listing timelines. Goldman Sachs analysts expect a total of 120 IPOs in the U.S. this year, raising $160 billion, a marked improvement over last year’s 61, but Liz Byer, partner at Class V Group, points out no signs of movement in the tech sector so far.

Byer said, increased public market volatility, exposed valuation vulnerabilities in software and AI segments, combined with geopolitical risks and weak employment data, have led VC-backed startups to generally stay on the sidelines. She said:

“The current market environment is better than the past three years, but far from enough to trigger an IPO boom.”

According to Jay Ritter, professor at the University of Florida, there were 31 tech IPOs in the U.S. last year, more than the total of the previous three years but still far below the 2021 peak of 121.

Concentration Risk and Concerns over Cost Transmission

As AI infrastructure financing accelerates, the weight of tech companies in investment-grade corporate bond indexes is approaching double digits. John Lloyd, Head of Global Multi-Sector Credit at Janus Henderson Investors, said the tech sector currently accounts for about 9% of the index and could rise to the teens, increasingly resembling the "trillion-dollar tech club" making up one-third of the S&P 500’s market value.

Dave Harrison Smith, CIO of Bailard, pointed out that this concentration is both an opportunity and a risk. These companies have abundant cash flow and flexible capital allocation, but "the scale of required investment is jaw-dropping." BondCliQ CEO Chris White warns that tech giants’ massive bond issuance will squeeze demand space for other issuers, forcing investors to demand higher yields and driving up financing costs across the whole market.

Although Alphabet’s recent bond sale reportedly saw five times oversubscription, with 2029 and 2031 notes priced at yields of 3.7% and 4.1% respectively—just slightly above three-year US Treasuries, reflecting investors asking for almost no risk premium—White said, "Supply continues to pour in and demand will eventually face pressure." He especially cautions that companies needing to refinance in the next few years may face significantly higher debt costs, with automakers, banks, and other sectors particularly under pressure.

Lloyd added that investment-grade credit spread is at a historic low, making bond allocation increasingly difficult. After completing a $20 billion dollar bond issue, Alphabet promptly turned to the European market, targeting around $11 billion in fundraising. A credit analyst cited by the media said if Alphabet succeeds offshore, other mega-scale cloud providers may follow suit, showing that the current tech bond expansion has already surpassed Wall Street’s traditional demand radius.

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