Key facts
- Issuance rose 18.7% from a year earlier, breaching the $1.86 trillion raised in 2020, per LSEG data.
- The number of offerings fell about 4% to 1,084, lifting the average deal size to roughly $1.7 billion from about $1.4 billion.
- Amazon.com and Alphabet raised the most through bond sales, LSEG data showed.
- Amazon, Alphabet, Meta Platforms, Microsoft and Oracle together sold over $370.7 billion, about a fifth of US investment-grade issuance, per LSEG.
- Goldman Sachs expects 35% of hyperscalers' capital expenditure to be bond-funded in 2027, it said in a November 6 note.
US investment-grade corporate bond issuance climbed to $1.88 trillion in the year to November 4, LSEG data showed, surpassing the previous annual record as Big Tech companies borrowed heavily to fund their AI ambitions. The 18.7% rise from a year earlier breached the $1.86 trillion raised in 2020, when companies stockpiled cash during the COVID-19 pandemic, driven by near-zero interest rates.
The number of offerings fell about 4% to 1,084, implying the average offering size swelled to roughly $1.7 billion from about $1.4 billion a year earlier, thanks to a few jumbo transactions by the largest borrowers.
Hyperscalers Amazon.com and Alphabet topped the list of companies that raised the most money by selling bonds in the year, the data showed. Combined with Meta Platforms, Microsoft and Oracle, they totaled over $370.7 billion, or roughly a fifth of all US investment-grade issuance so far in the year, LSEG data showed.
"The market has absorbed the AI issuance and it is evident from the oversubscribed nature of the deals," said Victoria Fernandez, chief market strategist and fixed income portfolio manager at Crossmark Global Investments. "The AI companies do not seem to be slowing down in coming to both the USD and Euro bond markets."
Apple became the latest tech giant to tap the bond market in the week, with a term sheet seen by Reuters showing the iPhone maker raising about $7.5 billion from a seven-part US-dollar bond offering.
The prospect of higher interest rates is adding to concerns about how quickly AI investment will translate into profits and whether heavily indebted companies can generate returns fast enough to service mounting interest costs. Default insurance costs at some of the biggest AI spenders have risen in recent months: Oracle's five-year spread hit a record 325.45 basis points in October, and Amazon, Alphabet, Nvidia and Meta also set records, though well below Oracle's level.
The Democratic sweep in US midterm elections has also sparked concerns about tougher AI regulation and a slowdown in the data-center buildout, the report said. Goldman Sachs analysts flagged delayed AI monetization and growth in purchase commitments as key risks to more debt issuance, according to a note published on November 6. The bank expects 35% of hyperscalers' capital expenditure to be funded through bond issuance in 2027, roughly in line with levels seen in the year.