The Bond Market Is Overrun By Ai
Tech giants are issuing IOUs as frantically as that classmate who was always asking everyone to spot him a dollar for vending machine snacks—and it’s dampening the prices of their bonds.
The bond market is currently dominated by companies raising cash for data centers and shiny new AI models. That deluge of AI debt has caused Big Tech’s bonds to trade at the highest yields compared to safer bonds since President Trump introduced sweeping tariffs in April.
Buy bonds, AI bonds
Bonds are becoming a larger part of AI borrowing and vice versa:
- AI companies surpassed banks as the largest high-grade bond issuers in the US, accounting for 14% of bond debt this year, according to JPMorgan.
- So-called AI hyperscalers like Amazon, Meta, Alphabet, and Oracle issued $90 billion in investment-grade bonds since the start of September, more than in the preceding 40 months, Dealogic data cited by the Wall Street Journal shows.
Investors in some cases seem anxious about the debt’s safety. The price of default insurance for Oracle’s bonds, for instance, tripled in the past month. But many of the AI-financing bonds are being sold by cash-flush tech behemoths with stronger credit ratings than Oracle.
Looking ahead: Morgan Stanley analysts recently said that if the AI borrowing fest continues past 2025, it could affect the bond market as a whole.—SK
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