US investment-grade bond sales top $1 trillion on Big Tech AI borrowing

Big Tech's insatiable appetite for AI infrastructure has pushed US investment-grade bond issuance past $1 trillion at the fastest pace since 2020.

US investment-grade bond sales surpassed $1 trillion as of June 2, the fastest pace since 2020, as Alphabet Inc., Amazon.com Inc., Meta Platforms Inc. and Oracle Corp. borrowed a combined $107 billion to fund AI infrastructure.

"The AI investment boom is reshaping how capital is allocated across the entire financial system," researchers at the Kobeissi Letter said.

The four hyperscalers issued more than eight times the dollar-denominated debt they sold in the same period last year, according to Bloomberg-compiled data. AI-related companies have accounted for 49 percent of all investment-grade issuance year to date, or roughly $140 billion, while their high-yield counterparts contributed $21 billion, or 38 percent of the total.

The borrowing binge comes as Alphabet, Amazon, Microsoft Corp. and Meta collectively plan $725 billion in capital expenditures in 2026, up 77 percent from last year's record $410 billion. With $210 billion in new bonds set to price, the question is whether the revenue from AI investments will materialize fast enough to service the debt.

Credit Default Swaps Surge to Record

Hedging activity tied to Big Tech credit has exploded alongside the debt issuance. The total net notional value of outstanding credit default swaps on major technology firms jumped to a record $12.5 billion, up 500 percent since the second quarter of 2025, according to the Kobeissi Letter. Oracle leads with $6.5 billion in CDS exposure, followed by Amazon and Alphabet at $2 billion each.

At Bank of America Corp., monthly notional trading volumes of Big Tech CDS have surged 900 percent since the start of 2025. "Most of these CDS contracts did not trade actively until 2025," the letter noted.

Alphabet's $80 Billion Equity Pivot

Alphabet this week announced plans to raise $80 billion in equity, including an investment from Berkshire Hathaway Inc., marking a shift from its reliance on debt markets. The company had already sold $31.51 billion in bonds in February, including a rare 100-year sterling tranche worth 1 billion pounds ($1.36 billion), and is considering its first yen-denominated bond sale.

The equity raise brings in Warren Buffett's diversified holding company as a major new investor, adding a high-profile endorsement of Alphabet's long-term AI and cloud strategy.

Debt Levels Draw Comparisons to Dot-Com Era

The financing frenzy has drawn warnings from prominent investors. Michael Burry cautioned that current high-yield debt levels dangerously mirror the 1999 tech bubble, raising red flags on the AI financing boom. Bridgewater Associates said in February that the AI boom has entered a "more dangerous phase," marked by exponentially rising investments in physical infrastructure and growing reliance on outside capital.

Meta's total debt has climbed to $84 billion from about $36 billion in 2023, while Oracle carries $123.5 billion in outstanding debt and Alphabet $100.44 billion. The five main hyperscalers plan to add roughly $2 trillion in AI-related assets to their balance sheets by 2030.

For now, investor appetite remains strong. Spreads on investment-grade bonds are near historic lows, and the $1 trillion milestone was reached faster than any year since 2020. But the record CDS volumes and rising leverage suggest bond markets are beginning to price in the risk that the AI spending cycle may not deliver returns as quickly as the borrowing suggests.

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