Hyperscaler Debt Dominance Reshapes Global Markets

The AI capex supercycle is transforming global debt markets, forcing other corporations and even sovereign issuers to adjust their borrowing strategies. According to Goldman Sachs, investors have provided around $500bn of financing to AI-linked groups so far this year.

Hyperscalers such as Meta, Amazon, Alphabet, Microsoft, and Oracle are dominating the market, accounting for about $200bn in debt issuance. These companies are expected to issue more than $1tn of new debt over the next few years.

Meta is set to debut in the European bond market this autumn to fund its AI expansion, while Amazon has sold a record C$14bn ($10bn) in Canadian dollars and Alphabet has issued a record A$5.5bn ($3.9bn) bond in Australia.

The increasing presence of hyperscalers in the debt market is causing concern among investors. Apollo's Torsten Sløk warns that if AI-linked companies' operating cash flow fails to triple from $600bn to $2tn, there could be wider spreads, capex cuts, and slower US GDP growth.

Sovereign debt managers are reportedly adjusting auction timing due to the crowding-out risk posed by hyperscalers competing for capital with the $31tn Treasury market. The European Central Bank has also flagged a potential crowding-out risk for euro-area borrowers.