By Vicky Ge Huang
Artificial-intelligence companies hungry for cash are rushing into an arcane corner of the bond market.
As U.S. companies search to fund their AI ambitions, they are issuing near-record volumes of bonds that investors can convert into stocks if the shares rise to a designated price. Investors like that they get the relative stability of bonds, along with some of the upside if shares take off.
So far this year, U.S.-listed companies including CoreWeave and Microchip Technology have issued about $54 billion worth of convertible bonds. That is up 43% from the same period in 2025, and the highest year-to-date volume since the start of the Covid-19 pandemic, according to Dealogic data going back to 1995.
Bankers and investors expect the momentum to continue, driven by everything from the AI boom's huge infrastructure build-outs to an insatiable demand for chips.
"Convertibles are growth capital for growth issuers, and I don't think you can think of a better growth opportunity than AI," said Joe Wysocki, senior co-portfolio manager at Calamos Investments.
For AI companies, the convertible-debt market provides a way to raise funding at rock-bottom costs, with many paying coupons as low as 0%. Investors are willing to accept such rates because of the volatility of AI shares, which heightens the appeal of the potential stock conversion.
Investors' ravenous appetite for AI-related assets has helped push the performance of convertible bonds past many traditional stock and bond benchmarks. The ICE BofA US Convertible index has been outpacing broader stock indexes this year, gaining more than 20%. The S&P 500 was up 10% while the Nasdaq was up 13% this year as of Tuesday's close.
A fresh wave of convertible-debt issuance is likely to come as more AI companies make their stock-market debuts, said Nick Robbins, CoreWeave's vice president of corporate development. CoreWeave recently issued $4 billion in convertible bonds carrying a 1.75% interest rate.
"High--growth AI businesses are perfect for the convertible market because the volatility that comes with all that growth makes pricing very attractive to issuers," said Robbins.
Terms have been so good for AI companies selling convertible debt that some are paying no interest on the bonds.
Akamai Technologies, the cybersecurity and cloud-computing company, recently issued $3.5 billion in zero-coupon convertible senior notes, split between 2030 and 2032 maturities. The 2030 notes carry a conversion price of $201.41 per share, a 42.5% premium over Akamai's $141.34 closing price on May 19. The 2032 notes carry a conversion price of $190.81 per share, representing a 35% premium.
Ed McGowan, chief financial officer of Akamai, said the company, a repeat issuer in the convertible-debt market, tapped the market when its stock was at a 26-year high and its share volatility reached a multiyear high.
"The convert market has been very good to us," said McGowan. "And so far every time we've gone for capital, it's been the most efficient, cheapest alternative for us."
Bigger companies sometimes avoid these bonds because of their potential to dilute the value of their stock and upset existing shareholders. But many issuers are seizing the opportunity while their stock prices are hovering near all-time highs, propelled by the AI enthusiasm fueling the broader market.
Credit spreads, or the premium investors demand to hold riskier corporate debt rather than ultrasafe Treasurys, are also near decade lows.
"What benefits convertible bond issuers: high stock prices, tight credit spreads, and well-supported stock volatility. We have all three of those things right now," said Michael Youngworth, head of global convertibles strategy at BofA Securities.
The gold rush in the convertible-debt market isn't without risks for investors. The market can reverse sharply if investors turn sour on the AI narrative. Any geopolitical shocks or macro events could also widen credit spreads, raising funding costs for issuers and sapping investor demand.
AI-driven demand could also quickly cool. In 2024, the convertible-debt market was flooded by crypto issuers such as Strategy, the bitcoin accumulation firm founded by Michael Saylor, before issuance by the sector fell along with crypto prices.
"The risk is we are getting a little overexposed to AI," said Manoj Shivdasani, investment strategist at GSR Research. "But that's part of the convert market. This market finances high-growth names."
Write to Vicky Ge Huang at vicky.huang@wsj.com
(END) Dow Jones Newswires
June 16, 2026 22:00 ET (02:00 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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