The AI gold rush is fueling a record corporate bond boom: Chart of the Day

Key Points:

• Major tech companies including Alphabet, Amazon, Meta, Microsoft, and Oracle are projected to spend about $800 billion on capital expenditures this year and $1.2 trillion next year, according to Goldman Sachs.
• To finance these expenses, US companies have increased bond issuance by 30% year-over-year, reaching $1.9 trillion through August, with AI-linked companies alone surpassing $400 billion globally this year.
• The surge in bond issuance has raised concerns about potential crowding out of other bond issuers and increased yields, highlighted by recent highs in 10-year and 30-year Treasury yields.
• Federal Reserve Chairman Kevin Warsh acknowledged that competition for capital from hyperscalers is influencing rising yields, though studies show limited direct crowding-out effects between AI-linked bonds and US Treasurys.
• Analysts note that AI-related bonds tend to be longer-term and attract different investors than Treasurys, and overall nonfinancial corporate bond issuance has remained stable despite the AI-driven borrowing surge.