Credit and AI: A Dangerous Liaison

AI-related borrowing is becoming a concentrated source of risk for investment-grade credit markets as hyperscalers fund rapidly rising capital spending through bond issuance.

• Consensus estimates put hyperscaler capital investment at $806 billion in 2026 and $1.104 trillion in 2027, compared with $237 billion in 2024.
• The five hyperscalers, Amazon, Google, Meta, Microsoft and Oracle, issued $108 billion of gross debt in 2025, with Goldman Sachs expecting $250 billion in 2026 and $420 billion in 2027.
• Companies linked to the AI theme are expected to raise $578 billion in 2026, equivalent to 12% of outstanding US investment-grade corporate credit.
• AI-related investment-grade issuers pay an estimated 20 basis point premium to comparable US credit, while Alphabet offered a coupon near 7% on a 20-year Australian dollar bond with a 180 basis point spread despite its AA+ rating.
• European investment-grade spreads widened by 20 basis points over the past month to 100 basis points as the MOVE Index reached 101, although spreads remain below the five-year average of 120 basis points and the September 2022 high of 230 basis points.

Takeaway: Attractive 4.3% yields in European investment-grade credit may suit directional carry strategies, but subdued spreads, weaker inflows and heavy AI-related issuance leave investors exposed to further widening that flexible credit strategies are better positioned to absorb.