Corporate bond buyers get picky with flood of AI debt — SkimNews
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- Goldman Sachs data projects hyperscaler gross debt issuance will hit a record US$420-billion next year, up 60 per cent from 2026 estimates, driven by financing for data centres, chips and AI infrastructure.
- AI-related issuer spreads are sitting around 115 basis points, roughly 37 bps wider than the 78 bps broader investment-grade market, per Goldman and ICE BofA data.
- Alphabet had to offer a large concession to complete its August debt sale, according to a BNY research note, while Aon's US$13.5-billion acquisition financing this month drew US$65-billion of orders and saw its 30-year tranche tighten by 35 basis points.
- BlackRock's Russell Brownback characterized some AI-linked deals as double-A credits pricing closer to triple-B spread levels, calling the widening straightforward supply-and-demand dynamics rather than a credit-quality concern.
- Wellington Management's Loren Moran said institutional investors are nearing single-name exposure limits once data-centre financing vehicles are aggregated back to parent technology companies, while many prefer to keep capital available in case AI enthusiasm cools.
- Brown Advisory's Colby Stilson said conviction must be very high because of coming supply and lack of visibility into return on invested capital, with Thornburg's Lon Erickson adding that bonds and Meta and Alphabet debt have consistently traded wider than similarly rated peers.
Why it matters: Highly rated AI hyperscalers — Alphabet, Meta and peers — now face materially higher borrowing costs: spreads 37 basis points wider than comparable investment-grade peers despite strong balance sheets. With US$420-billion in projected issuance flooding bond markets, even double-A tech credits are pricing closer to triple-B levels, forcing AI-linked borrowers to offer concessions while traditional issuers enjoy heavily oversubscribed deals.
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