Barclays analysts have indicated that major U.S. technology companies are poised for a sustained wave of bond issuance in the second half of the year, which is expected to continue weighing on valuations for the remainder of 2026. This outlook includes an anticipated return to the bond market by Microsoft.
In a report published on Thursday, analysts including Dominique Toublan and Andrew Keches noted that so-called hyperscale cloud providers, such as Microsoft, Amazon, Alphabet Inc., Meta Platforms, Inc., Oracle, and SpaceX, have already issued the equivalent of $218 billion in bonds globally this year. This figure could potentially rise to around $285 billion by the end of 2026.
The analysts stated that the surge in debt supply linked to artificial intelligence (AI) infrastructure investment is pushing the high-grade bond market toward an "inflection point." Consequently, they have downgraded their rating on high-grade tech sector debt from "market weight" to "underweight."
"While hyperscalers continue to issue at a massive scale, deteriorating trading metrics suggest that the market's absorption capacity is not without limits," they wrote.
Demand for recent new bond issues has shown signs of weakening, even as issuers have offered significant new issue concessions—the extra premium paid over their existing bonds to attract buyers. Concurrently, spreads on technology sector bonds, a key gauge of perceived credit risk, have widened this year, underperforming the levels implied by these companies' credit ratings.
Barclays expects the second-half bond supply to include what would be Microsoft's first meaningful bond offering since 2017, as well as a second issuance this year from Meta Platforms, Inc..
Microsoft declined to comment. Meta Platforms, Inc. did not immediately respond to a request for comment.
The analysts noted that the widening tech bond spreads have made valuations more attractive, but the market's anticipation of further supply is likely to keep volatility elevated. "Until a clear inflection point in funding needs emerges, we see no need to meaningfully overweight the sector to capture spread," they concluded.
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