The scale of bond issuance is approaching historical highs! AI infrastructure is burning money wildly, and the total debt of U.S. companies has surged to $1.7 trillion

Driven by the surge in financing demand for artificial intelligence infrastructure construction, the bond issuance scale of investment-grade corporations in the United States has reached $1.7 trillion this year, approaching the historical record set during the COVID-19 pandemic in 2020.

Large technology groups led by Meta, Alphabet, Amazon, and Oracle are heavily utilizing the bond market for financing to build massive data centers and supporting energy systems. According to Goldman Sachs, AI-related borrowing currently accounts for about 30% of the net issuance of U.S. investment-grade bonds. Despite concerns in the market about the rising debt levels of "hyperscale computing companies" in AI, this financing trend is expected to continue growing through 2026.

With the arrival of the "AI bond issuance wave," investor attitudes have begun to diverge. Previously, benefiting from the easing of trade tensions and a rebound in risk assets, the borrowing costs for top U.S. corporations relative to U.S. Treasury bonds fell to a spread of 0.74 percentage points during the summer, the lowest level since the late 1990s. However, as investors have become cautious due to the influx of AI-related bonds in the market, this spread has slightly rebounded to above 0.8 percentage points.

The market generally expects that future bond issuance activities will become more frequent. In addition to the funding needs for AI construction, over $1 trillion in debt will mature each year for the next three years, coupled with active merger and acquisition channels, large-scale refinancing, and acquisition financing demands, which may push bond issuance volumes to surpass historical peaks in 2026 and beyond.

Financing Frenzy Approaching Historical Peaks

According to tracking data from the industry association Sifma as of the end of November, U.S. corporations have sold $1.7 trillion in investment-grade bonds this year, a figure that is rapidly approaching the $1.8 trillion record set in 2020. Unlike 2020, when companies raised funds to strengthen their balance sheets in response to the impact of the COVID-19 pandemic, this year's bond issuance boom is primarily driven by aggressive capital expenditures.

Erin Spalsbury, head of U.S. investment-grade bonds at Insight Investment, stated:

"This is just the tip of the iceberg. It is very safe to say that we will see more issuance next year, and the market is preparing for it."

JP Morgan previously estimated that by 2030, the AI sector alone would need to borrow $1.5 trillion to support its construction needs.

Despite the massive borrowing scale, market doubts about the return cycle of AI investments are causing asset price volatility. The current revenue growth of some technology companies has not matched their aggressive borrowing levels; for example, Oracle's latest quarterly report showed that its revenue fell short of expectations, while data center expenditures exceeded expectations.

This mismatch in fundamentals has triggered a sell-off in technology sector stocks and bonds. Investors are concerned that if the returns from the AI boom cannot be quickly realized to cover the surge in debt, the current borrowing frenzy could evolve into a credit crisis. This concern has directly transmitted to the pricing side, with TD Securities U.S. credit strategist Hans Mikkelsen predicting that as additional issuance puts pressure on investor appetite, borrowing costs for top corporations relative to Treasury bonds may rise by about 0.2 to 0.3 percentage points next year

A New Peak in Bond Issuance Expected in 2026

Looking ahead, structural factors in the market will further drive up bond issuance. Dan Mead, head of investment-grade syndicate at Bank of America, pointed out that over the next three years, more than $1 trillion in debt will mature each year, forcing companies to engage in large-scale refinancing transactions. Additionally, active mergers and acquisitions (M&A) activity will also prompt companies to issue large bonds to finance acquisitions.

Dan Mead stated:

“We expect 2026 to be equally busy and could potentially become the year with the highest issuance of investment-grade bonds.”

This forecast indicates that despite the current high level of financing, the supply pressure in the U.S. corporate bond market is unlikely to ease in the short term due to the triple drivers of AI infrastructure, debt extension, and M&A activity.

In the face of potential risks, some investors have begun to take defensive measures. Hans Mikkelsen noted in a report that the financing demand in the technology sector next year is so significant that life insurance companies, which are major buyers of long-term bonds, may exceed their internal risk exposure limits for single bond issuers.

Trading data from the derivatives market also confirms the rising anxiety in the market. According to data from the clearinghouse DTCC, since early September, the trading volume of single-name credit default swaps (CDS) linked to a few U.S. tech giants has surged by about 90%. Among them, Oracle's CDS prices reached their highest level since 2009 earlier this month. Investors are purchasing such derivatives to hedge against the tail risk of the AI boom potentially turning into a credit collapse