Big Tech's Record Debt Boom Reshapes Global Credit and Funding Markets
Tech giants are flooding global debt markets with historic bond issuances to fund the artificial intelligence boom, driving up borrowing costs and reshaping credit landscapes.
Silicon Valley technology giants are expanding globally in search of capital, reshaping the economic landscape as Europe's debt markets prepare to welcome a new borrower. Meta is set to tap the European bond market for the first time this autumn to raise funds for its artificial intelligence expansion. This marks the latest stop in the sector's record-breaking chase for capital from both new and traditional sources, triggering a massive wave of borrowing with profound implications for other issuers during the current artificial intelligence investment supercycle.
"The narrative is everywhere, in every corner," says Greg Peters, co-chief investment officer of fixed income at asset manager PGIM. According to Peters, the volume of debt entering the market is historical, with numbers that are simply enormous and game-changing. This fundraising drive is fundamentally altering how the world borrows money, affecting the location, timing, and cost at which corporations and governments issue debt. Many companies are forced to walk on eggshells around hyperscalers—massive providers of cloud computing and digital infrastructure operating data centers on a gargantuan scale.
The Global Ripple Effect of Big Tech Borrowing
These companies time their bond offerings to avoid clashes with tech giant issuances, frequently opting for shorter durations to bypass the oversupply of long-term debt. Even the largest financial players acknowledge the impact. Federal Reserve Chair Jerome Powell and Treasury Secretary Scott Bessent have noted that hyperscalers are competing for capital against the 31 trillion dollar U.S. Treasury market, where 10-year borrowing costs recently hit their highest levels since 2002. Meanwhile, the European Central Bank has warned that the surge in Big Tech borrowing could hinder other companies and economic sectors from accessing financing.
The scale of lending has shattered all precedents. Japan's SoftBank recently raised over 11 billion dollars in debt through the largest junk bond issuance in history to finance investments in ChatGPT creator OpenAI. According to Goldman Sachs, investors have provided approximately 500 billion dollars in financing to artificial intelligence-related groups since the beginning of the year. Hyperscalers including Amazon, Alphabet, Meta, Microsoft, and Oracle account for roughly 200 billion dollars of this total, and they are expected to issue over one trillion dollars in new debt over the coming years to fund infrastructure investments.
"The volume of debt entering the market is historical. The numbers are simply enormous. It is a game-changer," says Greg Peters of PGIM.
Distorted Pricing and Interconnected Risks
This extraordinary demand has created credit markets capable of supporting larger and longer-term debt issuances than ever before, but it has also distorted pricing. High-grade bonds occasionally trade at a discount compared to lower-quality issues due to sudden oversupply. Furthermore, chipmakers, data center operators, and their power suppliers are borrowing from both public and private credit markets while mutually financing one another, making it increasingly difficult for pension funds and insurance companies to assess their true exposure.
During the second-quarter earnings season, Google, Amazon, Microsoft, and Meta raised their capital expenditure forecasts for the year to a combined total of 745 billion dollars. Andy Charlton, a portfolio manager at M&G, notes that there are effectively two credit markets now: artificial intelligence-related issuers and everyone else. Nevertheless, tech giants show no signs of slowing down, undeterred by elevated borrowing costs as they pursue massive infrastructure projects across global currencies.
