In 2025, US private companies issued Investment Grade bonds totaling $1.7 trillion, nearing the record set in 2020 when firms raced to recover from the COVID-19 crisis. This time, however, many companies are borrowing aggressively to invest in AI infrastructure, sparking market worries about a looming "debt overload" in the financial system.
Reports indicate that this year's bond issuance is approaching the $1.8 trillion record from 2020, a year when businesses urgently raised funds to stabilize finances amid the COVID-19 pandemic. Many firms are taking advantage of still-low borrowing costs to refinance existing debt and ease long-term interest pressure.
Data from Sifma, the US financial industry association tracking figures through November, reveals that this fundraising round goes beyond balance sheet management. It clearly reflects borrowing to capitalize on the AI boom, led by tech giants like Meta, Alphabet, Amazon, and Oracle, which are raising funds to build massive data centers and develop the necessary power infrastructure to drive AI processing.
Goldman Sachs estimates that currently about 30% of all Investment Grade bond issuance is tied to AI investments by hyperscalers, a share expected to grow in 2026 despite increasing market concerns over the rapid debt expansion among large tech companies.
In mid-2025, US private sector borrowing costs dropped to their lowest spread over US Treasuries since the late 1990s, following easing trade tensions and a resurgence in risk assets. However, the spread has since risen above 0.8 percentage points from 0.74, as investors recognize the flood of AI-related bonds entering the market.
A key investor concern is the mismatch between the massive borrowing to fund AI investments and the actual revenues generated at present.
Oracle, a closely watched company, recently reported earnings below expectations while its data center spending exceeded forecasts. This has triggered sell-offs in both its stock and debt instruments within the tech sector.
Many investors believe that 2026 bond issuance could surpass the COVID-19 record, as Dan Mead, Head of Investment Grade Bond Distribution at Bank of America, stated that 2026 is likely to be another very active year in the market, with a strong chance of becoming the year with the highest Investment Grade bond issuance ever. Furthermore, Hans Mikkelsen, US credit strategist at TD Securities, also anticipates that the spread premium companies with high credit ratings must pay could rise by another 0.2 to 0.3 percentage points next year due to intense bond supply pressure.
Trading of Credit Default Swaps (CDS), derivatives that compensate investors if companies default on debt, has surged noticeably in recent months. Oracle's CDS reached its highest level since 2009.
Data from DTCC shows that CDS trading volume for US tech-related companies has increased about 90% since early September, reflecting growing investor anxiety over an AI bubble. This trend has led some investors to hedge risks early amid fears that AI could trigger a "credit crisis" if returns do not come quickly enough to support the rising debt burden.
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