Nearly $500 billion in new debt looms, and tech giants' AI infrastructure financing raises default concerns.

The artificial intelligence race is pushing the U.S. corporate bond market to a new pressure point. In a U.S. corporate bond market worth more than $10 trillion, investors are growing increasingly uneasy about tech giants' massive borrowing for AI infrastructure, and a risk repricing around large technology companies is emerging: credit insurance prices are soaring, market volatility is intensifying, and related bonds are underperforming. This year, heavyweight borrowers such as Oracle Corporation (ORCL.US), Broadcom Inc. (AVGO.US), and SpaceX (SPCX.US) have collectively priced nearly $500 billion in new debt to pay for the infrastructure underpinning artificial intelligence. Compiled data show that this scale is expected to multiply in the coming months and years. Broadcom Inc. alone could raise about $600 billion in the coming years to fund computing buildout. The speed and scale of borrowing, combined with uncertain technological prospects and rising interest rates, are putting increasing pressure on the entire industry. In recent months, the technology sector has become one of the worst performers in the credit market, causing losses for investors. At the same time, average daily trading volumes in technology bonds and credit derivatives have surged. So-called CDS, or credit default swaps, are similar to bond default insurance. Rising prices mean investors must pay more to hedge default risk and are often seen as a signal of deteriorating market sentiment. Recently, news that SpaceX and Broadcom Inc. may launch a new round of financing, potentially involving more than $100 billion, pushed prices of credit derivatives tied to hyperscalers and chipmakers to elevated levels. The market is thus implying a markedly higher risk of default over the next five years: Oracle Corporation has exceeded 20%, SpaceX is about 16%, and even NVIDIA Corporation, the world's most valuable company, has been assigned a default risk of more than 7%. Mark Clegg, a senior fixed-income trader at Allspring Global Investments, said: "Every new financing announcement is like another bidder coming to compete for investors' balance sheets. This is causing spread volatility that would have been unimaginable a year ago. Some days, it seems the market has to hold an emergency meeting every few hours to reprice the scale of AI buildout." In the past, "mega deals" in the tens of billions of dollars were rare, syndicate banks would typically warm up the market months in advance, and most huge deals were used for mergers and acquisitions. This year, the U.S. high-grade market has seen nine deals of $25 billion or more, the most in history, with most coming from the technology industry. At the same time, the U.S. high-yield bond market is also set for one of its busiest years on record. Although the debt market has so far absorbed record supply relatively well, investors are beginning to demand higher compensation. Steven Kolenstein, a fixed-income portfolio manager at T. Rowe Price, noted that this trend is especially evident when financing demand expands from hyperscalers to chip financing, data centers, and other structures. Kolenstein said: "One concern is that exposure is increasingly concentrated in a relatively small number of companies and ultimately points to the same AI investment cycle, even if risk is spread across different issuers, industries, and financing structures. This could create correlation risk, and current valuations may not fully reflect that." At present, the problem is less actual deterioration in credit quality than market saturation. Most large borrowers remain profitable, with stable cash flows and earnings momentum, and their weak performance has not yet spread to the broader market, which remains relatively solid. These borrowers are tapping global market demand as much as possible and exploring various debt structures to diversify risk. But the surge in debt supply over a short period has at least given investors some bargaining power to demand higher risk compensation. At the same time, AI adoption, potential returns, and technological risks remain unknown and could upend valuations. The latest cases have further heightened market tension. Reports said Broadcom Inc., just days after launching a $60 billion debt financing to help Anthropic PBC with AI buildout, is planning its next blockbuster deal. Its five-year CDS widened by 3 basis points on Thursday to a record 136 basis points. Oracle Corporation is widely seen as a key barometer of AI credit risk. The Wall Street Journal reported that Oracle Corporation is in talks with Apollo and Goldman Sachs Group, Inc. to arrange financing for large-scale chip purchases. Market participants said this could involve a structure in which outside investors fund a special purpose vehicle (SPV) to buy chips and then lease them to Oracle Corporation, rather than Oracle Corporation prepaying for large chip purchases with unsecured debt. Such an arrangement could reduce Oracle Corporation's near-term borrowing needs and ease pressure on its credit rating. But uncertainty still unsettles investors, and Oracle Corporation's CDS rose about 10.5 basis points on Thursday to close at a record 261 basis points. Meanwhile, SpaceX's credit risk indicator set a record for a second consecutive trading day after reports that the company is in talks with banks and investors to raise $40 billion to buy NVIDIA Corporation chips. In many ways, this round of repricing reflects a market at a crossroads. To continue scaling AI technology, companies need to pay huge and growing computing costs; but as competition intensifies and potential regulatory pressure rises, revenue growth may no longer be so astonishing. Andrew Dassori, chief investment officer at Wavelength Capital Management, said the resulting market volatility could create opportunities for traders. Dassori said: "The market is adapting to these conditions, and spread moves and volatility are the manifestation of that."