Tech’s AI Push Risks a Bond Market Blowback: Credit Weekly
Summary
Major tech companies are set to invest heavily in artificial intelligence, surpassing investor expectations. This surge raises concerns among money managers about potential impacts on credit markets, highlighting the growing intersection of technology and finance.
Key Insights
What is a 'bond market blowback' in the context of tech's AI investments?
A bond market blowback refers to potential disruptions in credit markets caused by a surge in bond issuance from tech companies funding massive AI investments, leading to widened credit spreads, increased supply pressure, and bouts of market indigestion as investors question funding sustainability.
Why are tech companies issuing more bonds to fund AI, and what are the projected amounts?
Tech hyperscalers are issuing bonds because AI requires enormous capital expenditures exceeding cash generation, with projections of $500 billion in capex in 2026 growing to $600 billion in 2027; bond markets may fund $200-250 billion of the needed $450 billion by 2028, including a record $108.7 billion issued in late 2025.