US debts rAIse the roof

US CORPORATE borrowing is hitting a record this year, thanks to artificial intelligence (AI) investments. Technology companies and other businesses are tapping the high-grade bond market to finance an unprecedented wave of spending.

The fundraising surge looks set to continue as major technology groups expand their data centre infrastructure and computing capacity, although volatile interest rates and rising borrowing costs could influence the pace of new deals in the months ahead.

US investment-grade bond issuance reached US$1.76 trillion last week, surpassing the previous annual record of US$1.75 trillion set in 2020, according to data compiled by Bloomberg News.

The latest milestone comes as companies raise hundreds of billions of dollars to support AI-related investments, acquisitions and other corporate needs.

The scale of the borrowing reflects the enormous capital requirements of the AI race.

As Bloomberg noted, more than US$300bil of AI-related funding has been raised in global high-grade bond markets so far in 2026, approaching three times the amount recorded for the whole of last year.

Nine separate US bond offerings have also reached at least US$25bil each this year.

All but the acquisition-related funding by Skydance Corp came from technology companies, highlighting how heavily the sector is driving the latest borrowing cycle, the newswire pointed out.

The fundraising is unlikely to stop here.

Major technology companies known as hyperscalers could spend as much as US$1 trillion annually in each of the next four years, according to some estimates, as they race to build the infrastructure needed to support AI development and deployment.

Some of that spending is expected to be financed through the US high-grade debt market, potentially keeping issuance elevated even as companies contend with more expensive financing and questions over the returns on their investments.

“We are witnessing one of the most capital-intensive corporate cycles in a generation,” Lindsay Rosner, head of multisector fixed income investing at Goldman Sachs Asset Management, told Bloomberg.

The borrowing boom is unfolding against a more challenging financial backdrop than in previous years.

Higher interest rates have increased the cost of raising funds, while investors have repeatedly questioned whether debt markets can absorb the volume of new supply and whether the investments being financed will ultimately generate sufficient returns.

Four months have set monthly issuance records this year.

Activity has, however, slowed sharply in October, following a global bond sell-off that pushed some US Treasury yields to their highest levels since 2002 amid inflation concerns and uncertainty over how much further the US Federal Reserve (Fed) might tighten monetary policy.

US investment-grade issuance stood at about US$80bil this month, compared with the lowest full-month total so far this year of US$139.6bil in July, Bloomberg highlighted.

Volatility effect

Recent market volatility has repeatedly prompted companies to postpone bond offerings in the hope of securing more favourable borrowing conditions.

Although US Treasury yields have eased from their recent highs, the average spread on investment-grade corporate debt ended last week near its widest level of 2026, offsetting some of the relief from lower government bond yields.

Nevertheless, borrowers continue to bring deals to market to finance planned expenditure and acquisitions, as well as refinance existing debt.

Some are pressing ahead to lock in funding before borrowing costs potentially climb further in the coming months.

The surge is also part of a broader global fundraising trend.

Publicly syndicated bond issuance worldwide is within US$70bil of last year’s record US$6.61 trillion, according to data compiled by Bloomberg.

For investors, however, the flood of corporate debt has come with weaker returns.

Higher interest rates contributed to a 1.49% loss in US investment- grade bonds on a total-return basis last Friday, according to a Bloomberg index.

Some newly issued bonds have also suffered sharp price declines in their first days of trading.

Even so, investor demand has remained strong enough to support the market.

US short- and intermediate-term high-grade bond funds attracted about US$235bil in net inflows through September, according to LSEG Lipper data, providing companies with a substantial pool of capital to tap.

“Higher borrowing costs aren’t restricting behaviour at the headline level,” and most activity tied to the AI buildout “is coming from largely rates-insensitive tech names,” Tim Kurpis, head of investment-grade credit at AllianceBernstein, told Bloomberg.

Meanwhile, “non-tech names are responding to higher rates, with more equity financing of M&A (mergers and acquisitions and less long-duration issuance”, he added.

The contrast with the previous issuance record is striking.

In 2020, the Fed slashed interest rates to near zero and pledged to buy corporate debt as it sought to stabilise markets and support the economy during the Covid-19 shutdowns.

US investment-grade issuance that year exceeded the previous record by about 30%, while last year’s US$1.59 trillion total was the highest since then.

This year’s borrowing, by comparison, is increasingly linked to expansion rather than emergency funding, as companies invest in AI infrastructure and pursue growth opportunities.

“Post Covid issuance was busy but defensive,” said Anish Shah, global head of debt capital markets at Morgan Stanley, speaking to Bloomberg News on the sidelines of the Morgan Stanley Credit Symposium in New York last week.

“Now it’s an offensive flurry of activity.”