AI Infrastructure Is Rewriting Corporate Bond Markets—But Is It Dangerous?
As artificial intelligence sweeps across industries, the companies powering its infrastructure are racing to build the data centers, compute clusters, and energy systems needed to keep the AI boom going. That surge in capital spending has pushed Big Tech into the bond market with unprecedented force. This year alone, U.S. corporations have issued more than $200 billion in investment-grade debt tied to AI initiatives—an eye-popping number that has caught the attention of both equity investors and fixed-income analysts.
For many people watching this unfold, the scale raises an uncomfortable question: Is the AI boom creating a debt bubble? After all, the borrowing spree is coming at the same time that several tech heavyweights—especially those in the Magnificent Seven—have seen meaningful stock pullbacks. And with some hyperscalers dropping up to 7% in November, investor nerves are running high.
Yet analysts across major financial institutions insist that the anxiety is misplaced. While spreads have widened and credit markets are adjusting to the deluge of new supply, experts argue the fundamentals remain remarkably strong. Below, we explore why analysts believe AI debt is not a bubble—despite soaring issuance, skepticism on Wall Street, and concerns about future AI returns.
Big Tech’s AI Borrowing Surge: The Numbers Behind the Headlines
AI Debt Issuance Hits Historic Levels
According to Janus Henderson, AI-related debt has become a transformative force in credit markets. As of October:
- U.S. investment-grade corporate issuance tied to AI exceeded $200 billion
- That is roughly 13% of all investment-grade debt issued this year
- Five companies—Amazon, Google, Meta, Microsoft, and Oracle—have driven most of the borrowing
These hyperscalers collectively issued $121 billion in IG debt this year, with $75 billion raised during September and October alone, a period marked by falling interest rates.
A New Record Is Coming
JP Morgan projects that total U.S. corporate bond issuance could hit $1.8 trillion in 2025, setting a new record.
This might sound alarming—but analysts emphasize that context matters.
Why Market Jitters Are Rising: Falling Stock Prices and Cooling Demand at Auctions
Even as these companies raise billions, many of their stocks have pulled back sharply.
- The Magnificent Seven ETF fell around 7% in November
- Amazon’s most recent bond sale saw order books fall 40% after pricing, twice the normal drop-off rate
These shifts have led some investors to wonder if enthusiasm for AI infrastructure is cooling—or if the debt markets are quietly reassessing the risks.
Widening Spreads Don’t Equal Crisis—Here’s Why
One of the clearest signs of market anxiety is widening credit spreads.
Key Spread Movements
- Amazon, Meta, Microsoft, and Alphabet saw spreads widen from ~50 bps to ~80 bps
- Oracle’s spreads widened the most—48 bps since September
- Oracle’s 5-year bonds now trade at 104 bps over Treasuries
- Its credit default swap (CDS) spreads have more than doubled, hitting their highest level since 2023
This has led some observers to wonder if bond investors are bracing for future distress.
But analysts say this view misses the real story.
The “Mount Rushmore of Credits”: Why Analysts Aren’t Worried
Robert Schiffman of Bloomberg Intelligence argues that hyperscalers represent the strongest credit cohort in modern markets.
Why Hyperscalers Are Extremely Safe Borrowers
- Credit ratings: AA- to AAA for Meta, Microsoft, Alphabet, and Amazon
- Trailing twelve-month operating cash flow: $30 billion to $340 billion
- AI-related capex hit $113.4 billion in Q3, up 75% YoY—yet cash flow remains solid
In Schiffman’s words, these companies have “massive financial flexibility,” capable of absorbing hundreds of billions in debt without destabilizing their balance sheets.
Spreads widened because of supply—not weakness
When tens of billions in new bonds flood the market at once, spreads tend to expand.
That doesn’t mean credit quality has deteriorated—it means the market is adjusting to volume.
HSBC analysts echoed this, noting:
- Over half of all tech IG issuance in H2 came from A-rated or higher issuers
- Aggregate capex-to-free-cash-flow ratios remain far below dot-com bubble conditions
- U.S. IG spreads touched their tightest levels in 15 years this year
In other words: the market is still incredibly healthy.
The Oracle Problem: The One Hyperscaler Showing Signs of Strain
While Big Tech’s credit remains pristine overall, Oracle stands out as the exception.
Why Oracle Looks Riskier
- Credit rating: BBB (much lower than peers)
- Outstanding debt: over $104 billion
- Free cash flow turned negative in 2025, the lowest point in 20+ years
These metrics have driven:
- Larger spread widening
- Higher CDS costs
- Growing investor caution
But analysts emphasize that Oracle alone does not represent the entire AI debt landscape.
Is AI Itself a Bubble? Analysts Say Bubble Fears Are Coming from the Wrong Place
If a bubble exists, analysts argue it’s likely forming in equities, not debt.
Why Equity Markets Look Frothier
- Meta is up 347% since 2023
- Alphabet is up 230%
- Microsoft is up 109%
- Nvidia’s data center revenue doubled and hit $39B–$41B annually
Some critics argue that these valuations assume massive future AI revenue that hasn’t fully materialized yet.
JP Morgan estimates that the global AI ecosystem needs $650 billion in annual revenue to justify current equity valuations.
But Demand Is No Longer Theoretical
The concerns about future AI revenue may be outdated.
- Nvidia’s hyperscale demand continues to exceed supply
- AWS annual revenue has reached $123 billion
- Citi estimates $780 billion in AI revenue by 2030
- Morgan Stanley forecasts a $1.5 trillion data center funding gap by 2028
Demand isn’t evaporating—it’s intensifying.
Credit Markets Are Essential to AI’s Next Stage of Growth
Tracy Chen of Brandywine Global emphasized that corporate bonds will be “critical” to filling the multi-trillion-dollar infrastructure deficit. The AI race requires:
- New data centers
- Massive energy capacity
- Advanced semiconductor supply chains
- Global cloud expansions
These investments cannot be funded through operating cash flow alone—bond markets are a necessary tool.
AI Debt Isn’t a Bubble—It’s a Massive Infrastructure Buildout With Strong Fundamentals
As breathtaking as Big Tech’s borrowing has been, analysts agree: AI debt is not a bubble. Instead, it represents a historic investment cycle where hyperscalers use their unmatched financial strength to build the next generation of global computing infrastructure.
Spreads have widened, equity valuations look stretched, and some companies—like Oracle—face real pressure. But the fundamentals across the largest issuers remain exceptionally strong, supported by deep cash reserves, robust demand for compute, and stable credit ratings.
If anything, the real risk lies not in debt markets but in whether AI revenues ultimately justify today’s massive investments. For now, analysts remain confident: demand is real, cash flow is strong, and AI’s expansion is still in the early innings.