(April 12): The artificial intelligence (AI) credit juggernaut keeps pushing forward as the relentless demand for exposure to the industry trumps fears that the conflict in the Middle East is causing energy prices and inflation to rise.
Despite the geopolitical headwinds, Wall Street was still able to successfully stitch together tens of billions of dollars in funding to underpin the AI boom in recent weeks. The tumult may even be making AI-linked high-grade debt more appealing this year as investors seek havens.
“We’re in one of those sort of self-fulfilling bull markets for AI,” said Brett Kozlowski, a portfolio manager at GW&K Investment Management LLC. “When issuance is there, we’ll fund it and by funding it they’ll issue more.”
Large cash balances and low leverage levels at so-called hyperscalers such as Meta Platforms Inc are providing solace to credit investors even as spreads remain narrow. With markets now calmer, Morgan Stanley is sticking with a pre-war estimate of US$400 billion of high-grade debt issuance this year to back hyperscaler and other AI-related investments, the investment bank told Bloomberg News.
Jumbo bond sales from hyperscalers alone could exceed US$100 billion over the rest of the year, some bankers estimate, adding to the more than US$80 billion in dollar-denominated debt already raised by Oracle Corp, Alphabet Inc, and Amazon.com Inc in the first quarter.
“If you’re a high-quality investment-grade issuer, you’re not going to have trouble because there’s just such a bid for that, especially in this environment,” said Kelly Kowalski, head of investment strategy at MassMutual.
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Outside of the high-grade public debt markets, CoreWeave Inc continued its borrowing spree by selling US$1.75 billion of junk bonds after striking a new deal to supply artificial intelligence computing power to Meta. Pacific Investment Management Co, meanwhile, is planning to sell on some of its US$14 billion in debt financing for an Oracle data centre project in Michigan through a private market for large institutional managers.
That potential deal is part of a wider offering for AI-related facilities. A group of banks is disposing of US$3 billion of loans for a data centre in Ohio backed by Meta, while Societe Generale SA is mulling a significant risk transfer of some of its exposure to the asset class to free up capital for new deals.
The success of the AI debt sales contrasts with wider jitters in credit. Blue-chip borrowers were forced to seize brief, fragile windows of calm to raise funds over the past month as the market was far from uniformly smooth. The final week of March saw more than US$5 billion in outflows from US high-grade debt, the largest since April 2025 and the first weekly outflow since November, according to LSEG Lipper data.
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“The investment grade market has been priced for perfection and recent geopolitical noise has been a reminder that things can come out of nowhere and derail funding plans,” said Meghan Graper, global head of debt capital markets at Barclays Plc. Still, “some of the hyperscaler supply you’ve seen is indicative of borrowers getting ahead and taking advantage of attractive funding conditions.”
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