AI Capex Surge Overwhelms Bond Market Demand
Hyperscalers project $825bn in capital expenditure this year, forcing record-breaking issuance into corporate debt markets despite calls for an AI slowdown.
CreditSights forecasts US hyperscalers will spend $825 billion on capital expenditure this year. This figure significantly exceeds the spending levels seen in the late 1990s telecoms boom. The scale of investment dwarfs historical precedents like the Apollo program.
Deutsche Bank researchers note the speed of this AI boom is unprecedented. Hyperscalers are hitting corporate bond markets in multiple currencies to fund this expansion. Amazon recently raised £4.25 billion in sterling, the second-largest corporate bond deal in that currency.
Record orderbooks support debt issuance
Oracle collected $129 billion in orders for a $25 billion bond issue in February. This demand came from the weakest-rated major firm in the group. Amazon’s first sterling issue attracted nearly £10.7 billion of final demand.
Data center operators are also accessing securitization markets on both sides of the Atlantic. These bonds are backed by space leased to computing-hungry hyperscalers. More deals are expected before the end of the year.
Regulatory calls for slowing development
Anthropic CEO Dario Amodei publicly called for a slowdown in AI development. Sam Altman and Elon Musk voiced agreement with this position. The goal is to allow risk prevention measures to catch up with technological progress.
President Trump rejected the idea of slowing AI development. He prefers the risk of rogue AI over potential advantages for China. This suggests the US government will not introduce regulatory frameworks to tame competition.
Capital needs persist regardless of R&D pace
A slowdown in research and development does not imply lower capital expenditure. Frontier labs will continue to develop and sell applications to businesses and consumers. Adoption of AI is expected to keep mushrooming even if R&D stops.
The demand for computing power remains insatiable. Investment in chips, data centers, and energy infrastructure must continue. GN auto markets/bonds reports that the bond market is currently absorbing this vast trawl for capital.
