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Large technology companies are moving from relying on cash flows to funding major AI projects through the public bond market. Alphabet, Meta, Oracle and Amazon have issued about 90 billion US dollars in bonds since September. Their combined issuance for 2025 is expected to exceed 120 billion US dollars. This is far above the five-year average of about 28 billion US dollars for similar firms.
Credit spreads on these hyperscaler bonds have widened. Market data shows the premium over US Treasuries has reached 78 basis points, up from 50 basis points in September. This signals that the bond market now sees more risk in technology credit than it did earlier in the year.
In This Guide
Why the Shift Matters for Bond Markets and the UK Economy
Although the activity is centred on US corporates, the impact reaches global fixed income markets. A surge in high-grade issuance raises the risk of oversupply and weaker credit metrics. That can put pressure on yields and spreads for investors who hold corporate bonds or gain indirect exposure through funds that invest in gilts and global credit.
Higher financing costs can also weigh on equity valuations. Technology has a large influence on global indices and contributes to earnings exposure in UK benchmarks such as the FTSE 100. A shift in credit sentiment may therefore act as an early signal for broader market caution.
The development also highlights how sovereign debt markets interact with corporate credit. Sharp moves in spreads can influence demand for risk-free assets. This can feed into gilt yields and the borrowing costs faced by the UK government. The AI investment cycle is no longer only an equity story. Pressure is now visible in bond markets, raising questions about leverage and the capacity of investors to absorb continued issuance.
What Is Driving The Change: AI, Capex And Debt
The main driver is the scale of spending on artificial intelligence infrastructure. Banks estimate that the build-out of data centres, cooling systems and advanced computing hardware could cost more than five trillion US dollars by 2030. Many technology firms once used free cash flow to cover these costs. Recent bond sales show they now rely more on external funding.
Asset managers report sharp increases in planned capex. Forecasts for the largest AI spenders in 2026 have risen from 314 billion US dollars at the start of 2025 to 518 billion US dollars by the third quarter. Large deals highlight this shift. Meta raised about 57 billion US dollars from public and private debt markets for a major data centre project. Oracle issued 18 billion US dollars to support new AI infrastructure partnerships.
These trends point to heavier debt issuance, new funding models and a clear rise in credit risk premia.
Interpreting The Spread Widening
Spreads reflect the premium over risk-free rates that investors require to compensate for credit risk and liquidity risk. A move from 50 basis points to 78 basis points is meaningful for highly rated issuers.
Several factors sit behind the shift:
Supply pressure. Issuance has been unusually high. The largest hyperscalers have issued about 121 billion US dollars in investment-grade debt this year, compared with an average of about 28 billion US dollars. More supply requires more buyers, which can push spreads wider.
Change in leverage. These firms remain financially strong, but their turn toward debt financing marks a change in approach. A sector used to carrying little net debt is now funding long-term infrastructure on a much larger scale. Credit markets are adjusting their view of this risk.
Uncertain returns. Heavy capex raises questions about when new AI investments will generate clear cash flow. Visibility on returns affects pricing in credit markets and has contributed to wider spreads.
End of ultra-tight spreads. Global credit markets had been characterised by very narrow spreads. Recent moves suggest a possible shift back to more normal trading ranges.
For UK bond investors, this trend signals that even well-regarded issuers can face rising financing costs. That can affect valuations, corporate issuance plans and broader fixed income conditions.
Implications For Investors, Markets And Sectors
The shift in tech credit conditions is starting to influence a wide range of asset classes. As borrowing costs rise and debt issuance accelerates, the effects are spreading from corporate credit into equities, fixed income and the wider UK economy.
Corporate credit
Technology is now a credit story as much as an equity story. Wider spreads mean higher borrowing costs and a fresh assessment of risk for investment-grade issuers.
Equity markets
The behaviour of tech credit markets may act as an early warning for global equity investors. If funding becomes more expensive or harder to secure, profit expectations in the sector may weaken. That could make valuations more sensitive to earnings surprises.
Fixed income more broadly
A re-pricing of risk in one of the strongest corporate sectors can influence credit conditions more widely. Higher required yields for investment-grade issuers may spill over into other sectors and into sovereign markets. For UK bondholders, this adds another layer to an environment already shaped by inflation and rising gilt yields.
UK economic links
The UK economy is tied to global technology supply chains and capital markets. If global credit conditions tighten, UK companies may face higher borrowing costs. This could slow investment and affect growth, inflation and interest rate expectations.
What To Watch Next
Quarterly results from major tech firms will show how much free cash flow is now going into AI projects rather than being returned to investors. Bond auction calendars from the Debt Management Office and from large US issuers will signal whether the market can keep absorbing heavy supply.
Updates from the Bank of England on credit conditions or interest rate plans will influence gilt yields and risk premia. Credit indicators such as option-adjusted spreads for investment-grade bonds will also be important as markets adjust to higher issuance.
The widening in technology credit spreads shows that the AI buildout is reshaping the bond market as well as equities. As firms issue more debt to finance infrastructure, investors are reassessing how much risk sits within corporate credit and how this could affect global fixed income in the months ahead.
