AI debt boom pushes US corporate bond sales close to record

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favorite tales on this weekly publication.US corporations have offered $1.7tn of investment-grade bonds in 2025, a near-record sum stoked by a rush of borrowing to fund AI infrastructure that has spurred considerations over a debt glut. This yr’s issuance — closing in on the $1.8tn issued in 2020 as companies rushed to shore up their funds through the Covid pandemic — has come as corporations took benefit of comparatively low borrowing prices to refinance their debt.However the debt gross sales, tracked by commerce physique Sifma by way of to the top of November, additionally mirror an AI borrowing increase, as Large Tech teams together with Meta, Alphabet, Amazon and Oracle tapped bond markets to fund information centres and the vitality methods wanted to energy them. AI-related borrowing now accounts for round 30 per cent of internet funding grade issuance, in line with Goldman Sachs, and is anticipated to develop in 2026, regardless of considerations over the extent of debt being taken on by the AI “hyperscalers”.“That is simply the tip of the iceberg,” mentioned Erin Spalsbury, head of US investment-grade bonds at Perception Funding. “It’s very secure to say that we are going to have extra issuance subsequent yr. The market is getting ready for that.”Company borrowing prices over the summer season fell to their lowest degree relative to US Treasuries because the finish of the final century as commerce tensions eased and riskier property rallied, with further rates of interest paid by top-rated corporations falling to as little as 0.74 proportion factors over authorities debt.They’ve since elevated barely to simply above 0.8 proportion factors as buyers reply to what has been known as a “flood” of AI-related issuance.Doubts in regards to the mismatch between AI borrowing and present revenues — for instance at Oracle’s quarterly earnings, the place income undershot expectations and information centre spending overshot — have sparked sell-offs in tech sector fairness and debt.Traders say issuance in 2026 is more likely to break the Covid document and put additional upward strain on corporations’ borrowing prices. Subsequent yr’s debt gross sales will probably be pushed not simply by the AI build-out — although JPMorgan estimates that sector might want to borrow $1.5tn by 2030.Greater than $1tn in debt is maturing in every of the subsequent three years, which would require massive refinancing offers, in line with Dan Mead, head of the investment-grade syndicate at Financial institution of America. A busy pipeline of M&A offers also needs to result in large bond gross sales to fund takeovers.“We count on a equally busy 2026, with the potential for it to be the biggest issuance yr ever for investment-grade bonds,” mentioned Mead. High-rated corporations’ borrowing prices over Treasuries may rise by round 0.2-0.3 proportion factors subsequent yr, estimated Hans Mikkelsen, a US credit score strategist at TD Securities, as the additional issuance places strain on buyers’ urge for food for US company debt.RecommendedIn a separate observe, Mikkelsen wrote that the quantity of financing the tech sector wants subsequent yr is so large that life insurance coverage corporations — massive consumers of long-dated bonds — might exceed their inner limits on publicity to a single bond issuer. Some buyers have already begun to hedge in opposition to the chance that the AI increase turns right into a credit score bust, if returns don’t come by way of rapidly sufficient to justify the surge in borrowing. Buying and selling in credit score default swaps, derivatives that pay out if an organization defaults, has jumped sharply in latest months for the biggest know-how issuers. Oracle’s CDS reached its highest degree since 2009 earlier this month.Volumes in single-name CDS tied to a handful of US tech teams have climbed about 90 per cent since early September, in line with information from clearing home DTCC.Extra reporting by Ian Smith