Tech companies flood market with AI bonds

Tech companies are raising huge sums of cash to fund their AI projects, flooding the bond market with new debt. Analysts worry it is straining businesses’ credit and equity.

Companies issue bonds to borrow money. Since September, Amazon, Alphabet, Meta, and Oracle have issued nearly $90 billion in investment-grade bonds, according to Dealogic. This is more than they have sold jointly in the past 40 months.

Meanwhile, AI data-center builders like TeraWulf and Cipher Mining CIFR have borrowed over $7 billion through riskier bonds.

The sudden surge has lowered bond prices and increased interest rates, reflecting investor concern about both the volume of new supply and weakening credit metrics.

The tech-heavy Nasdaq is down 6.1% this month, showing growing market worries about the sky-high valuations of AI companies.

Big Tech companies like Amazon, Google, and Microsoft could handle the pressure well because they already make tons of cash. But others, like Meta and Oracle, are spending vast amounts on AI but don’t have as much of a financial cushion.

AI cloud provider CoreWeave saw its bonds due in 2031, issued in July, trade at 92 cents on the dollar. News about delays in its data center construction projects further pushed its shares down 46% this month.

According to analysts, the bond market may be affected if borrowing continues at its current pace.