The bond market has a supply problem, and its name is artificial intelligence. Tech giants are borrowing at a pace that would make a central bank blush, flooding fixed-income markets with new debt to fund their AI ambitions.
Morgan Stanley estimates roughly $570 billion in global AI-related debt issuance for 2026. By the end of May, $236 billion of that had already been priced, a pace approximately four times faster than the same period last year. The AI infrastructure buildout is generating a tidal wave of corporate bonds, and it’s reshaping how investors think about risk in fixed income.
The hyperscaler borrowing spree
The biggest names in tech are leading the charge. Nvidia issued $25 billion in bonds in June, and Amazon followed with its own $25 billion offering in July. Amazon even had to sweeten the deal with extra yield to attract buyers.
The order coverage ratio for hyperscaler bond issuances sat at nearly 5x back in February. By July, that ratio had dropped below 2x.
Credit spreads are confirming the shift. Alphabet and Meta saw their bond spreads widen by 0.12 and 0.16 percentage points, respectively, after their substantial issuances.
Why this matters beyond bonds
The tech sector now constitutes approximately 10% of the Bloomberg Corporate Bond Index, up from 9% in 2024.
For existing bondholders, rising yields on new issuances translate directly into mark-to-market losses on their current holdings. When new bonds offer higher yields, older bonds with lower coupons become less attractive, and their prices drop.
What investors should watch
The declining order coverage ratios are the canary in the coal mine here. If Amazon had to add sweeteners to its July deal, each successive deal tests the market’s appetite, and those tests are getting harder to pass.