AI arms race burns out astronomical debt: Bank of America raises debt issuance expectations for super large-scale cloud service providers to $175 billion.

Bank of America Corp raised its forecast for the issuance of investment-grade bonds by so-called "hyper-scale cloud service providers" in 2026 by 25% to $175 billion, while also maintaining the expectation of $65 billion in new bond issuances this year. Bank of America analyst Tom Curcuruto stated in a report to clients last Friday that this upward revision was mainly due to Amazon.com, Inc. issuing $54 billion in bonds last week after announcing an investment in OpenAI, a transaction that was not included in the bank's previous forecast. He noted, "We expect there will be approximately $65 billion in bond issuances remaining for the rest of 2026. If the peak in bond issuances has passed, it will be positive for credit spreads." Hyper-scale cloud service providers refer to large cloud computing companies that heavily invest in computing power and infrastructure to support the development of artificial intelligence (AI). These companies have already issued $110 billion in investment-grade bonds in 2026, accounting for 63% of Bank of America's latest forecast. The bank expects Meta, Microsoft Corporation, and Alphabet Inc. Class C to issue approximately $30 billion, $20 billion, and $15 billion respectively within the year, with about a quarter of the bonds priced in foreign currencies. Technology companies are heavily investing in AI computing facilities and rely heavily on the bond market for funding, which has raised concerns in the market: will this tech capital boom lead to future growth or foster speculative bubbles? In 2026, spending by hyper-scale cloud service providers in the data center sector is expected to increase by about 70% year-on-year, reaching over $600 billion. Last week, Amazon.com, Inc. issued $37 billion in bonds in the U.S. market and 14.5 billion in bonds in the European market, setting a record for bond issuances by a European company; of which, it received subscription orders of up to $126 billion from asset management institutions in the U.S. market alone. Curcuruto believes that whether the scale of bond issuances by hyper-scale cloud service providers will continue to increase will depend on the new capital expenditure plans disclosed in the company's financial reports at the end of April and beginning of May. He stated that after stock buybacks and dividends, corporate capital expenditures have nearly reached pre-cash flow levels. If the cloud giants further increase their spending guidance, it will directly impact future bond issuance sizes. Furthermore, Bank of America specifically mentioned that Oracle Corporation is maintaining its capital expenditure expectations for 2026, and has stated that it will achieve "decoupling of spending and demand" in 2027, which is seen as a positive for its future bond issuances.