Big Tech’s AI Debt Wave Threatening to Swamp Credit Markets

Core Viewpoint - A significant increase in debt sales from major tech companies poses a risk of overwhelming buyers and could weaken the credit market on both sides of the Atlantic [1] Group 1: Debt Sales and Market Impact - Tech firms are projected to raise up to $1.5 trillion in debt by 2028 to finance expansion in artificial intelligence and data centers, potentially widening spreads across the market [2] - JPMorgan Chase & Co. warns that a surge in data center financing could lead to supply indigestion, particularly in dollar markets, while also affecting euro markets [3] - Investors are beginning to question the viability of massive investments in artificial intelligence, although there are no immediate signs of panic in the credit market [4] Group 2: Major Offerings and Demand - Alphabet raised $17.5 billion in the US and €6.5 billion ($7.5 billion) in Europe, marking the second-largest corporate deal in Europe this year, while Meta sold $30 billion and Oracle Corp. raised $18 billion [4] - Meta experienced a record peak order book of $125 billion, indicating strong demand for its bond offerings [4] Group 3: Supply Concerns and Quality of Offerings - Hedge fund Man Group Plc highlights that high-yield firms, including former bitcoin miners, are also issuing bonds, raising concerns about the quality of these offerings [5] - A potential oversupply of lower-quality names in the AI sector may be challenging for the market to absorb, according to Man Group [5] Group 4: Capital Expenditure Needs - JPMorgan estimates that major tech companies, including Alphabet, Meta, Amazon.com Inc., Microsoft Corp., and Oracle, will have capital expenditure needs of approximately $570 billion for 2026, a significant increase from $125 billion in 2021 [6] - UBS Group AG anticipates total tech debt supply to exceed $900 billion in the coming year [6]