Hyperscaler Debt Floods Markets as Long-Term Interest Rates Hit 20-Year High
Long-term interest rates have climbed to their highest levels in two decades, and hyperscaler debt issuance is emerging as a key culprit. According to Apollo Global's chief economist Torsten Slok, 'hyperscaler issuance' is one of three main drivers behind 30-year Treasury yields sitting at a 20-year high, alongside inflation and fiscal deficits.
Apollo Global notes that Amazon.com Inc. (NASDAQ:AMZN) and Alphabet Inc. (NASDAQ:GOOGL) (NASDAQ:GOOG) have led the borrowing spree over the past 12 months with Meta Platforms Inc. (NASDAQ:META) and Oracle Corp. (NYSE:ORCL) also ranked among the biggest issuers.
The 'AI Debt Tsunami' has been coined by Palumbo Wealth Management to describe the rapid growth of AI debt, with high-grade AI debt supply reaching $270 billion by early July, more than double all of 2025's total. Hyperscaler capital expenditures are projected at $650 billion to $800 billion this year and could exceed $1 trillion in 2027.
Off-balance-sheet debt has reportedly swelled to $1.65 trillion, according to Nikkei Asia, further obscuring true leverage. Goldman Sachs sounded a similar alarm on July 20, noting that Microsoft, Amazon, Alphabet, Meta, Oracle, Nvidia Corp. (NASDAQ:NVDA) and SpaceX (NASDAQ:SPCX) collectively issued $244 billion in bonds this year, 14 times 2024 levels and more than double last year's total.
Hyperscaler leverage ratios doubled from 0.9x to 1.8x in roughly six months, and the bond market's pain threshold has shrunk from $75 billion to just $25 billion, according to Goldman.