America’s biggest companies have now borrowed more money through investment-grade bonds this year than ever before, and the giant technology firms building artificial intelligence are a big reason why.
U.S. investment-grade corporate bond sales reached a record $1.88 trillion through November 4, up 18.7% from a year earlier and topping the previous high of $1.86 trillion set in 2020, when companies stockpiled cash during the pandemic, LSEG data show.
Amazon and Alphabet led the borrowing. Together with Meta, Microsoft and Oracle, the big tech firms raised more than $370.7 billion, about a fifth of all such borrowing this year, largely to pay for AI data centers and computing power. Apple is the latest to join in, seeking to raise about $7.5 billion in a seven-part bond offering, according to a term sheet for the deal. That deal is not yet completed.
Notably, companies are selling fewer but much bigger bonds: the number of offerings fell about 4% to 1,084, so the average deal swelled to roughly $1.7 billion from about $1.4 billion a year ago.
Why it matters to your wallet
When companies borrow, they have to pay interest, and that cost ripples outward. Heavy corporate borrowing can push up the interest rates that shape mortgages, car loans and credit cards. It also affects retirement savings, since bond funds in 401(k) plans are buying much of this debt. Goldman Sachs forecasts that more than a third of big AI investment could be bond-financed by 2027, meaning even more borrowing is likely coming.
“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.”
The open question is whether the enormous AI spending will generate profits fast enough to cover the mounting interest bills, especially with borrowing costs rising.
JBizNews Desk | New York
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