AI Funding Demand Moves Into Corporate Bond Markets

Big Tech borrowing outside the United States is becoming a clearer financing signal for artificial intelligence infrastructure.

Alphabet is already one of the largest outstanding borrowers in euro, sterling, Swiss franc and yen corporate bond markets, while Amazon raised 14.5 billion euros, or USD 16.88 billion, in March through an eight-part deal that LSEG described as the largest ever in the euro corporate bond market.

The activity shows how hyperscalers are using smaller currency markets to diversify funding sources before heavier AI infrastructure spending, especially for data centers.

Alphabet set borrowing records across yen, Canadian dollar, Swiss franc and sterling deals, while internationally placed non-financial corporate bond sales tracked by LSEG have surged in the Swiss franc and yen markets this year.

Currency Markets Become Part of the AI Buildout

Giulio Baratta, co-head of investment-grade finance at BNP Paribas, said the pace of investment could make some of these companies among the largest global issuers in any currency within 12 months.

In Europe, Alphabet and Amazon have helped lift borrowing by non-financial U.S. companies above 60 billion euros, or USD 69.85 billion, this year.

Morgan Stanley expects hyperscalers to raise about 50 billion euros of euro debt this year.

That could help the United States overtake France as the euro zone's largest source of overall corporate debt.

John Servidea, global co-head of investment grade finance at JPMorgan, said markets including the euro now offer more depth and opportunity for large capital raising than they did historically.

For Big Tech borrowers, foreign-currency debt can help hedge currency risk from global assets and may offer borrowing costs that are lower than, or similar to, the U.S. dollar market.

Servidea said raising money abroad can also let companies leave longer gaps between U.S. market visits.

Bond Investors Add AI Exposure

The investor side of the story is also shifting.

Bank of America said hyperscalers' non-dollar issuance has doubled to 30% of their total bond funding this year.

Nicolas Forest, chief investment officer at Candriam, is buying euro deals from hyperscalers to add technology exposure in the European bond market.

By May 31, Alphabet ranked seventh in ICE BofA's non-financial euro corporate bond index and fourth in the provider's sterling corporate index.

The company also sat within the top 10 of the Swiss franc and yen corporate indexes, and Amazon had reached eighth place in Swiss francs.

The practical question is whether corporate bond markets outside the United States can absorb more AI-linked technology issuance without importing greater volatility from the sector.

David Zahn, head of European fixed income at Franklin Templeton, said AI-related problems would probably add volatility, making investor risk appetite a key constraint on future issuance.