The AI-led borrowing frenzy could end up driving interest rates higher, Apollo's chief economist says

Core Insights - A top economist warns that debt-fueled capital expenditure (capex) spending, particularly from AI hyperscalers, is expected to significantly impact investment-grade bond issuance in 2026, potentially driving up interest rates [1][5] Group 1: Investment-Grade Bond Issuance - AI hyperscalers are anticipated to be major contributors to investment-grade bond issuance this year, with estimates ranging from $1.6 trillion to $2.25 trillion [2][3] - In 2025, major tech companies like Alphabet, Amazon, Meta, Microsoft, and Oracle collectively issued $100 billion in bonds, more than double the amount raised in the previous year [4] Group 2: Impact on Interest Rates - The influx of corporate debt could lead to upward pressure on interest rates and credit spreads, as the volume of fixed-income products entering the market is significant [3] - There are concerns that increased issuance from hyperscalers may divert buyers from other bond markets, such as Treasuries, which could further elevate interest rates [2][5] Group 3: Broader Economic Implications - The heavy borrowing in the tech sector, particularly for AI-related infrastructure, raises questions about the sustainability of this growth, with potential dire consequences if growth stalls [5]