Investors in highly rated corporate bonds are becoming more selective as technology companies raise huge amounts of debt to finance artificial intelligence infrastructure, data centres and advanced chips.
The growing supply of AI-related bonds is creating a divide in the corporate debt market. While investors remain confident in the financial strength of major technology companies, many are demanding higher returns to take on additional exposure to the sector.
Debt issuance by major AI-focused technology companies, known as hyperscalers, is expected to reach a record $420 billion next year, about 60% above estimated 2026 levels. US corporate bond issuance overall had already risen 30% year-on-year to $1.9 trillion through August.
AI-related issuers are currently paying spreads of about 115 basis points over benchmark rates, compared with around 78 basis points for the broader investment-grade market. Analysts say the wider spreads largely reflect the volume of new borrowing rather than fears of imminent defaults.
Companies such as Alphabet and Meta continue to have strong balance sheets, but investors are concerned about concentration risk and the possibility of frequent additional borrowing as AI spending accelerates.
By contrast, bonds from traditional financial and industrial companies are attracting strong demand, as investors seek alternatives to the crowded AI debt market.
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