MW The paradox at the heart of credit markets: the biggest borrowers are the strongest credits
By Jules Rimmer
Despite huge issuance, credit markets remain receptive to AI debt
Photo by Angela Weiss / AFP
Hyperscalers have collectively issued more than $170 billion of bonds to help fund nearly $800 billion in capital expenditure this year and an estimated $1 trillion next year, and despite that wave of issuance they're still judged by markets as being the most credit worthy.
That paradox was explored by Laura Cooper, the global investment strategist at Nuveen, overseeing about $1.4 trillion in assets. She noted the companies responsible for the huge boom in investment-grade bond sales haven't become cheaper. "Spreads have held, and in some cases tightened as demand remains insatiable."
For instance, if one takes the example of Nvidia (NVDA) which tapped bond markets for $25 billion this week, its bonds due in 2060 trade at a yield to maturity of 5.43%, according to FactSet, just 49 basis points over the closest comparable U.S. Treasury, the 30-year BX:TMUBMUSD30Y. Moreover, in the last six months its credit-default spread, the annual protection a fixed-income investor may pay to insure against a default on the debt, has actually contracted from 45 to 41 basis points.
This compares with the overall credit spread of investment-grade bonds that currently stands around 73 bps and has tightened meaningfully in 2026, despite bumper, almost record issuance.
Alphabet $(GOOG)$, parent company of hyperscaler Google, raised around $32 billion in February, including a very rare century bond.. The spread on its 50-year bonds is steady around 5.9%, 95 bps over the U.S. long bond and its CDS has widened, but not appreciably, from 40 to 51. The story is similar at both Microsoft $(MSFT)$ and Amazon (AMZN) where CDS are a bit wider but not enough to cause concern.
Cooper makes the point that crowding is not yet apparent in this sector of the bond market. "Current capex announcements are landing in a liquid market and the buffer provided by hyperscaler balance sheet strength is real." Investors wanting confirmation of this only need to look at the Nvidia transaction which was three times oversubscribed, despite not having accessed the bond markets for five years. Nvidia didn't even need to bother with a roadshow.
"It didn't have to explain itself as investors already knew the story, and the AI bet behind it." Cooper noted.
She believes investors buying these bonds are taking a wager on AI infrastructure demand through 2056, "across the next six presidential elections and four or five Fed cycles." Risks are present, Cooper acknowledges, and AI plays will need to demonstrate a return on the capex. These strong balance sheets "provide buffer, but they do not eliminate risk."
A note published Tuesday by JPMorgan strategist Tarek Hamid went further than Cooper in their estimates of issuance. Year-to-date AI-related bond sales are more like $300 billion, the report assessed. Furthermore, over the next five years Hamid anticipates $5.5 trillion of total capex as he said the debt-financing component of that is $4.1 trillion, he projects.
-Jules Rimmer
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(END) Dow Jones Newswires
June 17, 2026 07:44 ET (11:44 GMT)
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