US tech giants are borrowing at such a scale that bond investors are increasingly viewing some emerging market peers as safer bets. SK Hynix Inc bonds due 2031 now trade at merely 9 basis points above Amazon.com Inc equivalents, a fraction of the 30 basis points premium seen a year ago, and hedging credit risk on the South Korean chipmaker now costs less than doing so for many American tech majors.
This shift is not confined to individual issuers—the risk premium on emerging market corporate debt indexes is converging with US benchmarks at an unprecedented pace. It highlights how the boundary between emerging and developed market risk is fading, especially for wealthier Asian economies like Taiwan and South Korea. But the real catalyst behind this convergence is the surge in artificial intelligence-related borrowing.
US technology firms have already borrowed over $600 billion globally for capital expenditure, with financing projected to reach trillions of dollars by 2030, which could push borrowing costs higher. Zurich Insurance market strategy head Puneet Sharma notes that "emerging market spreads are likely to tighten further. I wouldn't be surprised if they end up trading through developed markets." Sharma characterizes emerging debt as a "passive beneficiary" of the American AI borrowing boom, while hyperscaler bond valuations increasingly reflect expectations of a substantial rise in bond issuance in the coming years.
The most visible sign of convergence is the narrowing gap between emerging market and US corporate bond spreads over Treasuries. According to JPMorgan index data, the difference currently stands at just a few basis points, versus a historical average of 30 to 50 basis points. JPMorgan strategists Yang-Myung Hong and Alisa Meyers predict spreads will converge by year-end. They note in a client report that "supply of investment-grade emerging market corporate bonds is more orderly, largely from Asia and the Middle East, where local investors continue to underpin demand."
Take Tencent Holdings Ltd and Apple Inc as an example. The risk premium on Tencent's 2031 bonds is roughly the same as Apple's equivalent maturity, reflecting similar market perceptions, despite Moody's rating Apple four notches higher. Similarly, Taiwan Semiconductor Manufacturing Co and Meta Platforms Inc both carry Aa3 credit ratings, but TSMC's dollar bonds due 2031 trade nearly 20 basis points tighter than Meta's comparable notes. This marks a stark reversal from two years ago, when TSMC's bonds traded about 25 basis points wider than Meta's.
Nazmeera Moola, chief commercial officer at Ninety One, says such pricing makes sense because "these companies sell chips, and it's fairly easy to predict their actual output." Companies beyond emerging tech are also benefiting. Suppliers of electricity, metals, and other data center raw materials are gaining, with copper demand alone expected to double by 2040.
Some investors argue the spread convergence has gone too far, pointing to higher US Treasury yields as a potential buying opportunity. Aegon Asset Management credit analyst Euart MacKerron counts among them; his fund holds no Asian tech names because he views spreads as too narrow. "If spreads widen further, we might consider swapping some of our emerging market debt into US bonds," he says.
Asian AI companies could also face substantial financing needs. Capital expenditure plans by Chinese internet giants and upcoming debt maturities are expected to sustain bond issuance into 2026-2027, with Kuaishou Technology and Tencent tapping dollar markets. South Korea has facilitated commitments of $880 billion from conglomerates including Samsung Group and SK Group toward chip and data center investments. Still, Nomura Asset Management portfolio manager Dickie Hodges argues that the sheer volume of US hyperscaler bond issuance and uncertainty over future returns on capital expenditure puts those bonds at a disadvantage. "Debt restructuring could increase down the line, and spreads on AI borrowers could widen," he says.
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