The AI debt tsunami compounded the impact of oil prices, and technology bonds were completely destroyed by “multiple shocks”

The Zhitong Finance App learned that due to renewed market concerns about the continued expansion of debt due to the boom in artificial intelligence investment, compounded by the escalation of the Middle East conflict, some major US technology company bonds collectively declined on Thursday.

As oil prices soared above $100 per barrel, inflation concerns heated up, and long-term treasury yields rose, further driving up the financing costs of companies that have already invested hundreds of billions of dollars in AI construction.

The quarterly earnings report released by Google's parent company Alphabet Inc. (GOOGL.US) after the market on Wednesday intensified the decline — the company raised its full-year capital expenditure guidance, which indicates that the issuance of new bonds that continue to pour into the market to support the investment boom is expected to continue.

Selling pressure drove Alphabet's 5.5% dividend bond yield due in 2046 up by about 9 basis points to 6.11%, and the spread with the highest rating benchmark widened to about 91 basis points, 6 basis points wider than Wednesday.

The yield on some bonds due 2030 from Oracle Corp. (ORCL.US), another core data center construction company, jumped 17 basis points to about 6.09%. Meanwhile, investors are pushing up credit default swap (CDS) prices for Microsoft, Amazon and other companies' debts, reflecting concerns about rising risks.

Tony Trzcinka, portfolio manager at Impax Asset Management, said: “The market is being hit by the triple impact of AI capital expenditure anxiety, oil price shocks, and interest rate repricing.”

Drastic fluctuations in the bond market were accompanied by an overall decline in the stock market. The Nasdaq 100 index fell nearly 2% on the same day, and the “Big Seven Tech” recorded the biggest one-day decline since the April 2025 tariff crisis.

AI has invested in huge loans — the total amount has reached about 350 billion US dollars so far this year alone — has put continuous pressure on the bond market, and the market is already showing signs that it is difficult for investors to absorb large amounts of new debt. At the same time, the market is also generally questioning whether AI can bring sufficient profits to cover high costs.

Another sign of heightened risk aversion is that, according to LSEG Lipper data, investors withdrew $7.1 billion in cash from US high-tier bond funds in the week ending Wednesday, the largest single weekly outflow since the beginning of the COVID-19 pandemic in April 2020.

Mark Clegg, senior fixed income trader at Allspring Global Investments, stated, “The technology sector used to be a safe haven for investors, but now hyperscale companies are catching up with the big six banks to become the largest issuers in the investment-grade market. Even when it was just rumored that another 20 billion US dollar new bond was issued, pricing for the entire sector broadened across the board. It's supply fatigue, and it's getting worse week by week.”

There are still plans for large-scale distribution in the future. BlackRock is seeking to issue more than $12 billion in bonds to finance Meta Platforms Inc.'s data center project in El Paso, Texas. Barclays has also raised its forecast for issuing US investment-grade bonds this year, from the previous 1.6 trillion US dollars to 1.9 trillion US dollars, to reflect the surge in AI-related debt.

John Lloyd, head of global multi-sector credit and portfolio manager at Janus Henderson Investors, said: “The market is realising that the supply of all asset classes will show no sign of weakening.”