Big Tech’s AI Debt Rush Roils Global Corporate Bond Markets

Multibillion-dollar bond sales hit Canada, the UK and beyond

Higher yields force local borrowers to rethink issuance timing

Competition among US hyperscalers to fund artificial intelligence investment is rippling through corporate bond markets far beyond the US. Amazon.com Inc. and Alphabet Inc. have sold multibillion-dollar bonds in currencies including the Canadian dollar, Swiss franc and British pound. The issuance has pushed up market rates and forced local companies to reconsider when to sell debt.

In May, Alphabet, Google’s parent, sold C$8.5 billion of bonds in Canada, or about $6.3 billion. At the time, it was the largest corporate bond sale ever in the Canadian market. Depending on maturity, the bonds offered yields 0.5 percentage point to 1.10 percentage points above Canadian government debt across five- to 30-year tenors.

A month later, Amazon broke that record with a C$14 billion corporate bond sale, worth about $10.3 billion. Alphabet and Amazon also tapped non-dollar bond markets outside Canada. Alphabet issued a total of $31.9 billion across five markets, including the UK, Switzerland, Europe and Japan, while Amazon sold $30.5 billion across three markets, including Europe and Switzerland.

The companies are issuing bonds outside the US to diversify funding sources and lower borrowing costs. But the surge in supply is distorting local corporate debt markets. According to the Financial Times, the spread over government debt on Canada’s AA-rated index, which includes Amazon and Alphabet, rose above that of the lower-rated A index. That leaves local issuers needing to offer higher yields than hyperscalers to draw investor demand.

Some local companies are delaying bond sales as a result. “It is affecting the pipeline and the timing of corporate bond issuance,” Manuel Gardiol, UBS’s head of Swiss debt capital markets, said.

It is not just Big Tech. Semiconductor companies are also raising large sums in the bond market. Bloomberg reported that Advanced Micro Devices Inc. sold $4.75 billion of dollar-denominated corporate bonds in the US, the biggest bond sale in the company’s history. AMD plans to use the proceeds for corporate purposes including debt repayment.

Son Ju-hyung, Hankyung.com reporter handbro@hankyung.com