AI companies raise $54 billion in convertible bonds to fund infrastructure build-out

US-listed companies have issued about $54 billion in convertible bonds so far this year, up 43 percent from the same period in 2025 and the highest year-to-date volume since the start of the Covid-19 pandemic, as artificial-intelligence companies tap the debt market for cheap infrastructure funding.

"Convertibles are growth capital for growth issuers, and I do not think you can think of a better growth opportunity than AI," said Joe Wysocki, senior co-portfolio manager at Calamos Investments.

The ICE BofA US Convertible index has gained more than 20 percent year-to-date, outpacing the S&P 500's 10 percent rise and the Nasdaq's 13 percent advance as of Tuesday's close. Credit spreads on corporate debt sit near decade lows, making borrowing conditions unusually favorable for issuers.

For AI companies, the convertible-debt market offers funding at rock-bottom costs, with many paying coupons as low as zero percent. Investors accept such rates because AI shares' high volatility increases the appeal of the potential stock conversion. The risk is that the market could reverse sharply if the AI narrative sours or a geopolitical shock widens credit spreads, raising funding costs and sapping demand.

Convertible bonds offer AI companies cheap capital

CoreWeave, the cloud-computing provider, recently issued $4 billion in convertible bonds carrying a 1.75 percent interest rate. Nick Robbins, the company's vice president of corporate development, said high-growth AI businesses are a natural fit for the convertible market because the volatility that comes with growth makes pricing attractive to issuers.

Akamai Technologies, the cybersecurity and cloud-computing company, issued $3.5 billion in zero-coupon convertible senior notes split between 2030 and 2032 maturities. The 2030 notes carry a conversion price of $201.41 per share, a 42.5 percent premium over Akamai's $141.34 closing price on May 19. The 2032 notes have a conversion price of $190.81 per share, a 35 percent premium. Ed McGowan, Akamai's chief financial officer, said the company tapped the market when its stock was at a 26-year high and share volatility reached a multiyear high. "The convert market has been very good to us," he said. "And so far every time we have gone for capital, it has been the most efficient, cheapest alternative for us."

Microchip Technology also issued convertible debt this year, joining a wave that bankers and investors expect to continue as AI infrastructure build-outs accelerate and demand for chips remains insatiable.

Dilution risk and concentration concerns linger

Bigger companies sometimes avoid convertible bonds because of their potential to dilute stock value and upset existing shareholders. But many issuers are seizing the opportunity while stock prices hover near all-time highs, propelled by AI enthusiasm. Michael Youngworth, head of global convertibles strategy at BofA Securities, said the three conditions that benefit convertible bond issuers — high stock prices, tight credit spreads and well-supported stock volatility — are all present now.

The gold rush carries risks. In 2024, the convertible-debt market was flooded by crypto issuers such as Strategy, the bitcoin accumulation firm founded by Michael Saylor, before issuance fell along with crypto prices. Manoj Shivdasani, investment strategist at GSR Research, said the risk is that the market is becoming overexposed to AI. "But that is part of the convert market," he said. "This market finances high-growth names."

A fresh wave of convertible-debt issuance is likely as more AI companies make their stock-market debuts, according to CoreWeave's Robbins. The last time convertible bond issuance reached comparable levels was during the pandemic era, when companies rushed to raise cash amid economic uncertainty. This time, the driver is not survival but expansion — AI companies spending billions on data centers, chips and cloud infrastructure to meet surging demand.

This article is for informational purposes only and does not constitute investment advice.