Financial analysts are expressing increasing concern that the significant borrowing by technology companies to fund artificial intelligence (AI) investments and data centers could soon saturate credit markets, potentially ending a years-long rally in corporate bonds. BNP Paribas analysts, for instance, predict that while investors can currently absorb the bond supply, this situation will soon become a major issue. This comes as global tech companies issued $428.3 billion in bonds in 2025, a substantial increase from about $150 billion in 2023, with private credit lending to AI-related firms also rising to around $200 billion in 2025.
Rising financing costs are already impacting AI capital expenditures. Since December 2025, spreads on the JP Morgan Liquid Hyperscaler basket have widened considerably, indicating increased concern about the capital intensity and uncertain return on investment for AI projects. This is not necessarily a default warning for major companies, but rather a repricing of risk and duration associated with the AI trade. The Bank of International Settlements estimates that AI-related investment is approaching 1% of GDP in the most exposed economies, with an increasing portion being debt-financed, including through "shadow borrowing" mechanisms that obscure the full risk.
The current market environment is exacerbating these concerns. Spiking oil prices have driven U.S. bond yields past 5%, with 10-year Treasury yields reaching this critical threshold. This level of borrowing cost could significantly impact the AI boom, leading hyperscalers to issue fewer bonds and face challenges in issuing new equity. Rockefeller International Chairman Ruchir Sharma warned that the AI bubble could pop if the 10-year yield "decisively breaches" 5%, a level that has historically been the upper end of its range since the dotcom era and a headwind for stocks.
Investor nervousness is also growing due to warnings from industry leaders about a potential slowdown in AI spending. This sentiment has already led to a sell-off in tech stocks, particularly chipmakers, despite their previous growth fueled by hyperscaler spending. The vulnerability of AI-driven rallies is becoming more apparent as rising yields add further pressure to stock prices. Remarkably, the heavy borrowing by U.S. Big Tech firms has even led some bond investors to consider emerging-market peers as safer bets, with risk premiums on emerging-market corporate debt indexes converging with comparable U.S. benchmarks for the first time.
