The global race for AI dominance has led major tech companies, dubbed "hyperscalers" like Amazon and Alphabet, to increasingly issue debt in foreign currencies, including the Swiss franc, British pound, and Canadian dollar. This strategy aims to tap new funding sources and avoid saturating the U.S. market with colossal debt volumes. These large deals are reshaping smaller credit markets, with the hyperscalers becoming some of the biggest issuers and, in some cases, crowding out other companies.
For example, Alphabet raised C$8.5 billion in the Canadian market, and Amazon followed with C$14 billion, briefly setting records. These substantial issuances have pushed up borrowing costs, with Canada's AA corporate credit index weakening and its spread over government bonds increasing. In the Swiss market, Amazon and Alphabet now account for 7.7% of the entire investment-grade credit index, despite having zero presence until this year, leading to repricing of the high-quality curve and wider valuations for other, similarly rated companies.
Analysts note that while some investors appreciate the increased liquidity these issuances bring to less liquid markets, there are concerns that the long-dated debt from tech companies could crowd out other corporate issuers and widen spreads across these smaller markets. The surge in capital expenditures for hyperscalers, estimated at around $725 billion this year—nearly double the mid-2025 level—is driving this need for external funding, as spending is outpacing operating cash flow. Overall, global AI-related debt issuance is projected to reach $570 billion by 2026, with hyperscalers already surpassing their full-year 2025 totals for investment-grade deals.
