For months, major technology companies aggressively tapped the bond market with massive debt offerings, initially drawing investors eager to ride the artificial intelligence wave. However, as demand weakens and concerns over a potential bubble intensify, these transactions are becoming harder to complete, and the cost of financing has risen significantly.
BlackRock Inc issued $12.5 billion in bonds on Monday, carrying a yield of 7.53%. According to data, this is one of the highest-yielding blue-chip data center bond sales since the AI financing frenzy began last year.
The bonds will help finance a data center in Texas linked to Meta Platforms Inc. The yield on these bonds is roughly 2 percentage points higher than the average yield for similarly rated bonds with an A or AA credit rating.
Since the start of 2025, global AI-related debt financing has surpassed $570 billion, causing borrowing costs to surge. With more deals queued up, this boom is pushing credit markets to their limits and prompting banks and other institutions to hedge against the risk that their investments may not yield returns.
Credit default swaps for companies such as Meta, Oracle, Alphabet Inc, and SpaceX have risen sharply as a result.
The BlackRock bond sale attracted only about $20 billion in orders, roughly 1.6 times the offering size. According to data compiled by Bloomberg, this is the lowest subscription multiple for a large US investment-grade AI bond deal, and it is far below the average of about 4 times seen this year. Generally, issuers expect demand to be several times the offering size to achieve the best pricing.
Meta and BlackRock plan to build a 1-gigawatt data center in Texas, with development costs estimated at around $14 billion. The bonds issued will be used to fund this project.
JPMorgan Chase and Morgan Stanley arranged the bond transaction. JPMorgan declined to comment, while representatives from Morgan Stanley, BlackRock, and Meta did not immediately respond to requests for comment.
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