The expectation for tech IPOs is heating up, but has Wall Street's main battleground shifted to the bond market?

Despite the high expectations for the IPO prospects of star companies like SpaceX and OpenAI, the real focus of the U.S. tech capital market has shifted to debt financing. To support the rapid expansion of AI infrastructure, the global issuance of tech and AI-related bonds is sharply increasing, expected to approach the $1 trillion mark this year from $710 billion in 2025.

The four tech giants—Alphabet, Amazon, Meta, and Microsoft—are projected to have a combined capital expenditure and financing lease scale of $700 billion this year to meet the epic demand for computing resources. To fill the funding gap, leading companies are intensively entering the bond market: Alphabet completed a bond issuance of over $30 billion this week, and Oracle also announced in early February that it plans to raise $45 billion to $50 billion this year, quickly executing a $25 billion bond sale.

Morgan Stanley estimates that there is approximately a $1.5 trillion financing gap in the AI infrastructure sector, most of which will be filled by the debt market. Analysts warn that as tech companies continue to issue bonds, the weight of the tech sector in the investment-grade corporate bond index may rise from the current 9% to over a dozen percentage points, exacerbating concentration risk at the index level; meanwhile, the massive supply may also push up the financing costs for issuers in other industries, creating cross-market spillover effects.

Massive Financing Drives Bond Market Expansion

UBS estimates that the global issuance of tech and AI-related debt will more than double year-on-year by 2025, reaching $710 billion, and is expected to approach $990 billion in 2026. Chris White, CEO of bond data service provider BondCliQ, pointed out that the corporate bond market is experiencing an unprecedented "massive supply" shock.

Oracle and Alphabet are leading this round of bond issuance, and more tech giants are signaling their financing intentions. Amazon submitted a mixed shelf registration document last week, indicating it may adopt a combination of equity and debt financing. Meta's Chief Financial Officer Susan Li stated during the earnings call that the company will "carefully assess the cost-effectiveness of external financing to supplement cash flow and may ultimately maintain a positive net debt balance." Tesla's Chief Financial Officer Vaibhav Taneja also expressed after the fourth-quarter earnings report that as infrastructure investments advance, the company "does not rule out seeking external funding through debt or other means."

U.S. IPO Market Remains Quiet

In stark contrast to the booming debt financing, the U.S. tech IPO market remains quiet. No well-known tech companies have submitted IPO applications this year, and the only remaining expectation anchor in the market is centered around Elon Musk's capital operations.

Last week, Musk merged SpaceX with the AI startup xAI to form a new entity valued at $1.25 trillion. Although there are reports that SpaceX plans to go public independently in mid-2026, investors and Gerber Kawasaki CEO Ross Gerber believe that Musk is more likely to choose to integrate it with Tesla rather than push it to the public market separately OpenAI and other AI stars with valuations in the hundreds of billions have yet to finalize their IPO timelines. Goldman Sachs analysts expect a total of 120 IPOs in the U.S. this year, raising $160 billion, a significant rebound from last year's 61, but Class V Group partner Liz Bayer points out that there are still no signs of a launch in the tech sector.

Bayer stated, the increased volatility in the public markets, the exposure of valuation vulnerabilities in software and AI-related sectors, combined with geopolitical risks and weak employment data, have led venture-backed startups to generally adopt a wait-and-see approach. He said:

“The current market environment is better than the past three years, but it is far from sufficient to trigger an IPO boom.”

According to Professor Jay Ritter of the University of Florida, there were 31 tech IPOs in the U.S. last year, which, while exceeding the total of the previous three years, is still far below the peak level of 121 in 2021.

Concentration Risk and Cost Transmission Concerns

As AI infrastructure financing accelerates, the weight of tech companies in the investment-grade corporate bond index is approaching double digits. John Lloyd, global multi-sector credit head at Janus Henderson Investors, stated that the tech sector currently accounts for about 9% of the index and is expected to rise to several percentage points, increasingly resembling the structural characteristics of the “trillion-dollar tech club” which comprises one-third of the S&P 500 index's market value.

Dave Harrison Smith, Chief Investment Officer at Bailard, pointed out that this concentration is both an opportunity and a risk. Related companies have ample cash flow and flexible capital allocation, but “the scale of required investments is astonishing.” Chris White, CEO of BondCliQ, warned that the intense bond issuance by tech giants will squeeze the market's demand space for other issuers, forcing investors to seek higher yields, thereby raising overall market financing costs.

Despite reports that Alphabet's recent bond sales were oversubscribed five times, with yields on notes maturing in 2029 and 2031 priced at 3.7% and 4.1%, respectively, only slightly above the three-year U.S. Treasury, reflecting that investors are almost not demanding a risk premium. However, White stated, “the continuous influx of supply will eventually pressure demand.” He specifically warned that companies needing to refinance continuously in the coming years may face significantly elevated debt costs, particularly in sectors like automotive manufacturing and banking.

Lloyd added that the current investment-grade credit spreads are at historical lows, making bond allocation more challenging. After completing a $20 billion dollar bond issuance, Alphabet immediately turned to the European market, aiming to raise about $11 billion. According to media reports citing a credit analyst, if Alphabet succeeds in the offshore market, it may trigger other large-scale cloud service providers to follow suit, indicating that this round of tech debt expansion has surpassed the traditional demand radius of Wall Street