AI Debt Indigestion Forces Wall Street to Rethink Bond Sales

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So far this year, Amazon, Alphabet, Nvidia, Meta, Oracle Corp. and SpaceX have together raised more than $200 billion from dollar bond sales, dwarfing the $13 billion from high-grade tech companies in the same period last year.

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The deluge is poised to continue. Banks led by Morgan Stanley are in talks to line up $15 billion of debt for an Anthropic PBC data-center project in Texas, backstopped by Alphabet’s Google. 

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One banker privately predicted that some $50 billion to $60 billion in debt from hyperscalers — the massive tech firms building data centers — will hit the market following the US Labor Day holiday in early September. 

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That figure could be even higher, but some clients requested an issuance pause so that they could accommodate the new supply, the banker said, asking not to be identified discussing private information.

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Some companies have tried to pre-empt saturation concerns. When Meta sold $25 billion of high-grade bonds in April, it indicated that it wouldn’t issue more until at least the fourth quarter of this year. That message helped support demand, according to people familiar with the matter. 

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And when Oracle raised $25 billion in February, it told investors it didn’t expect to return to the bond market in 2026. 

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Banks, meanwhile, are growing even more tight-lipped about upcoming transactions, omitting jumbo tech deals from their weekly bond sale forecasts.

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“A bank preparing a $20 billion deal would be reluctant to forecast weekly issuance wider than the rest of the market as that could reveal its involvement and unsettle investors,” said Mariya Entina, a portfolio manager at DoubleLine. 

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In fact, high-grade sales have far exceeded syndicate-desk projections compiled by Bloomberg in the weeks tech giants tapped the market this year.

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Riskier credit markets face similar challenges. The high-yield bond market has also become crowded, prompting data center CoreWeave Inc. to lean more heavily on leveraged-loans. 

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And Goldman Sachs Group Inc. is in discussions with investors over pricing for a potential $5.4 billion debt offering to help fund a Blackstone-backed QTS data center tied to Microsoft Corp. 

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The AI funding pressure is also upending conventions in bond markets, which typically slow in the US and Europe in summer.

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Late last month, for example, Equinix xScale brought a senior-secured debt deal backed by two data centers in the UK’s Slough. It opted to set the spread on the deal immediately, skipping the customary haggling of initial price talks and price guidance.

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The flood has made investors selective.

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“Given every hyperscaler’s capex ambition, I am not in a hurry to add,” said Kshitij Sinha, a fixed income fund manager at Canada Life Asset Management. 

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—With assistance from Aaron Weinman, Michael Gambale and Gerson Freitas Jr..

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