Big Tech's AI Borrowing Surge Reshapes US Corporate Bond Landscape
Big Tech companies are poised to become the dominant force within the US corporate bond market, driven by an unprecedented borrowing boom to fund artificial intelligence infrastructure development. This seismic shift is raising significant concerns among investors about market concentration and potential risks.
Unprecedented Capital Requirements Transform Market Dynamics
The race to build AI capabilities is creating extraordinary capital expenditure demands for data centres, power infrastructure, and custom semiconductor chips. According to forecasts from Apollo Global Management, approximately half of the ten largest borrowers in the US bond market will be hyperscale technology firms by the decade's end, including industry giants like Alphabet, Amazon, Meta, Microsoft, and Oracle.
This represents a fundamental transformation for a market historically dominated by banking institutions and telecommunications groups, whose stable cash flows traditionally provided bond investors with insulation from the volatility characteristic of technology-focused equity markets. Morgan Stanley estimates that hyperscalers and related sectors will raise approximately $400 billion from the US investment-grade bond market during 2026 alone, a dramatic increase from $170 billion last year and just $44 billion in 2024.
Growing Concentration Creates Investor Concerns
The increasing market concentration is already evident within benchmark indices, with JPMorgan reporting that AI and data-centre-related issuers now constitute 14.5 percent of its US Liquid Index. The financial institution anticipates this figure will surpass 20 percent by 2030, creating what Apollo analysts describe as "a single macro trade on AI" that appears diversified across issuers and sectors but represents concentrated exposure.
Investors managing trillions of dollars have begun reducing their exposure amid concerns about a potential AI bubble, with many observing parallels to previous market cycles where substantial borrowing preceded significant risk reassessment. The effects are already visible at individual issuer levels, with Oracle experiencing a credit spread increase exceeding 0.75 percentage points following its $18 billion bond sale last autumn, according to S&P Global data.
Ripple Effects Extend Beyond Technology Sector
The AI investment boom has generated increased borrowing activity across multiple sectors beyond technology, including utilities, industrial firms, and energy companies that supply power and equipment to data centre operations. This phenomenon extends AI exposure far deeper into credit portfolios than simple issuer lists might suggest, creating broader market implications.
Barclays strategist Dominique Toublan has questioned how bond markets would respond if hyperscale technology companies needed to tap investors repeatedly to sustain their AI expansion, asking: "If they have to borrow $10 billion every quarter, how is the market going to react?"
Diverging Perspectives on Risk Assessment
Despite these concerns, some market participants argue that risks are being overstated. The largest hyperscale technology firms remain among the world's most cash-rich corporations, possessing significant capacity to absorb higher debt levels without threatening their credit ratings.
Nathaniel Rosenbaum, a strategist at JPMorgan, suggests the surge in issuance represents "a net positive" for overall credit quality, while John Lloyd of Janus Henderson notes that companies like Alphabet and Meta could substantially increase leverage while maintaining robust balance sheets. Lloyd adds: "If AI blows up, it will be bad for their equity. But their credit would likely still be very solid."
Broader Economic Implications Emerge
The scale of corporate borrowing remains difficult to ignore, with Apollo's chief economist Torsten Slok warning that competition between corporate bond issuance and US Treasury issuance could potentially push yields higher throughout the economy. Rising long-term yields influence multiple economic factors, including mortgage rates, corporate investment decisions, and government finances, granting bond investors substantial influence over broader economic outlooks.
These developments occur against a backdrop of recent technology stock volatility and investment-grade credit spreads sitting near historic lows, leaving minimal margin for error should market sentiment shift. As Brian Kloss, a portfolio manager at Brandywine Global who has been taking profits in top-rated credit, observes: "There's fear in markets, and everyone's looking for the next shoe to drop."
