Key Points
- Major tech firms like Google and Meta have sold nearly $90 billion in bonds over the past two months to fund AI.
- Analysts forecast this AI-related debt could reach $1.5 trillion over the next five years.
- Prominent investors worry that this massive new debt from an unproven sector could destabilize the corporate bond market.
- The spending is a huge gamble, as AI has not yet generated the profits to justify the investment.
Major tech companies are on a borrowing binge to fuel their artificial intelligence ambitions, and it’s making some big investors nervous. The rush to build AI-ready data centers is creating a high-stakes gamble for the entire $9 trillion U.S. corporate bond market.
In just the last two months, four of the biggest names in tech—Google’s parent company Alphabet, Meta, Oracle, and Amazon—have sold nearly $90 billion in bonds. This massive sale is just the beginning. Analysts at J.P. Morgan predict that tech companies could sell a staggering $1.5 trillion in bonds for AI data centers over the next five years. If they’re right, this new wave of debt could make up over 20% of the high-grade bond market by 2030.
This rapid increase in borrowing has sounded alarms for seasoned investors. Robert Cohen, a director at the investment firm DoubleLine, voiced his concern about a “significant re-levering” of the market. He worries that a huge, unproven sector is taking on massive debt, which could change the risk profile of the typically stable investment-grade market. “They are building capacity to provide support for, ultimately, a product where the end use is not super clear,” he said.
The core issue is that while the promise of AI has fueled market excitement, the technology has yet to deliver the massive profits needed to justify such enormous spending. This has added a new layer of worry to the financial markets.
While the overall corporate bond market remains healthy, there are early signs of unease. A key indicator of investor sentiment, known as credit spreads, has recently widened, suggesting growing concern about the flood of new tech bonds. For now, experts like Cohen are not panicking, but they are “on alert.”
