U.S.-listed companies have sold about $54 billion of convertible bonds so far this year, up 43% from the same stretch of 2025 and the highest year-to-date total since the start of the COVID-19 pandemic, according to Dealogic data going back to 1995. The buyers powering that rush are artificial-intelligence companies hungry for cash, and the terms they are getting are remarkably cheap — in some cases, effectively free.
A convertible bond is a hybrid. Like a normal bond, an investor lends a company money. But the bond comes with a feature that can work in everyone’s favor: if the company’s stock climbs to a predetermined price, the investor can convert the bond into shares and participate in the stock’s gains. Investors like it because they get the relative safety of a bond plus exposure to stock-market upside. Companies like it because that upside allows them to borrow at far lower rates than traditional debt would require.
How low? Many AI issuers are paying coupons as small as 0%, meaning no interest at all. Investors accept those terms because AI stocks move so dramatically that the option to convert into stock is valuable on its own. The more volatile the shares, the more valuable that conversion feature becomes — and AI stocks have been among the market’s most volatile.
Akamai Technologies, the cybersecurity and cloud-computing company, recently demonstrated just how attractive the market has become for issuers. The company sold $3.5 billion in zero-coupon convertible notes split between maturities in 2030 and 2032. The 2030 notes can convert at $201.41 per share, a 42.5% premium above Akamai’s $141.34 closing price on May 19, while the 2032 notes convert at $190.81, a 35% premium. Chief Financial Officer Ed McGowan said the company entered the market while its stock traded near a 26-year high and volatility was elevated. He described convertibles as the cheapest and most efficient financing tool available to the company.
The largest names tied to the AI boom are taking advantage of the same opportunity. CoreWeave recently issued $4 billion of convertible bonds carrying just a 1.75% interest rate. Oracle raised $5 billion through a similar transaction earlier this year, while Microchip Technology has also been active in the market. According to CoreWeave executives, the volatility that accompanies fast-growing AI businesses is exactly what makes these securities attractive to investors and easy for companies to sell.
Investors have been rewarded for their enthusiasm. The ICE BofA U.S. Convertible Index has gained more than 20% this year, outperforming broader equity benchmarks. By comparison, the S&P 500 has risen roughly 10%, while the Nasdaq Composite has advanced about 13%. Joe Wysocki, senior co-portfolio manager at Calamos Investments, summed up the appeal succinctly: “Convertibles are growth capital for growth issuers, and I don’t think you can think of a better growth opportunity than AI.”
Behind the financial engineering lies a very real economic story. The money raised through these offerings is helping fund the physical buildout of artificial intelligence infrastructure — data centers, power systems, networking equipment, and the advanced chips that AI models require. The spending supports construction firms, electrical contractors, utility providers, and manufacturers supplying servers and networking hardware. Convertible bonds have quietly become one of the primary financing tools behind the AI expansion, meaning the health of this corner of the debt market reaches far beyond Wall Street.
There are risks. Because convertible bonds can eventually become shares, they can dilute existing stockholders if conversions occur. That potential dilution is one reason some large companies avoid them. The securities can also lose value quickly if AI stocks fall sharply, since much of their appeal comes from the possibility of converting into higher-priced shares. A market that rewards growth generously can reverse course just as quickly when expectations are missed.
For now, however, momentum remains firmly with issuers. Bankers expect additional deals as more AI-related companies enter public markets and seek capital to fund expansion. The flood of near-free money reflects the extraordinary confidence investors currently have in the long-term growth of artificial intelligence.
The real test will come when the AI rally eventually slows, if it does. Until then, companies appear likely to keep borrowing billions at rates that would have seemed unimaginable only a few years ago.
Wall Street – JBizNews Desk
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