The US corporate bond market appears to be getting safer due to a surge in debt issuance by highly-rated tech giants such as Amazon, Meta Platforms, and Alphabet. These companies, characterized by AA credit ratings, have significantly boosted the average rating of Bloomberg's US investment-grade bond index; AA and A rated bonds now constitute 52% of the index, up from about 46% in 2021. This influx of high-quality debt, largely driven by AI infrastructure investments, has also contributed to credit spreads across the investment-grade market remaining near historic lows.
Despite this apparent safety, many investors are wary of the true risk profile. While hyperscalers like Amazon, Microsoft, and Google can borrow at razor-thin margins above Treasuries, newer AI and data center issuers face much higher borrowing costs, with some credits seeing spreads as high as 3.75 percentage points above comparable bonds. Some of these newer bonds have also declined in price post-issuance, suggesting a market already differentiating between established AI players and emerging hopefuls.
Big Tech firms collectively raised approximately $120 billion in corporate debt in 2025, almost entirely for AI infrastructure. For 2026, hyperscalers are projected to spend about $650 billion on capital expenditures, a significant portion of which will be debt-funded. For example, Amazon recently raised $37 billion from a US bond sale, which could expand to nearly $50 billion with a planned euro offering, to help finance its $200 billion data center investment in 2026 and a potential $50 billion investment in OpenAI. Orders for Amazon's US dollar leg alone reached $126 billion, one of the largest corporate offering order books ever.
This aggressive debt issuance, particularly from the five major tech borrowers (Amazon, Alphabet, Meta, Microsoft, and Oracle), has led to AI-related debt accounting for approximately 15% of the entire US corporate bond universe. However, some major investors are becoming cautious. Fidelity, for instance, has announced it is steering its core bond portfolios away from these new AI deals. Fidelity argues that investors are not adequately compensated for the risk, as the high credit ratings of these tech giants mean their bonds offer only a small yield premium over US Treasuries, leaving little room for error or significant reward. This sentiment highlights a growing concern that if AI revenue growth doesn't materialize as expected, the resulting credit deterioration could broadly tighten financial conditions.
