Tech bonds ride the AI wave: risks and opportunities

Major tech giants are borrowing heavily to fuel the AI boom, raising both opportunities and risks for bond investors.

Major technology companies — including Google, Amazon, Meta, Microsoft, and Oracle — are increasingly relying on debt to fund their aggressive investments in artificial intelligence. This year alone, corporate debt issuance in the sector has surpassed $700 billion, with projected costs for data centers, GPUs, and related infrastructure expected to reach $600 billion by 2026.

Analysts caution that the corporate bond market is becoming closely tied to the performance of AI-driven initiatives. Any slowdown in adoption or revenue generation could negatively impact bond valuations, raising risks for investors who are heavily exposed to tech debt.

Despite these concerns, some market participants see opportunities. Companies with strong balance sheets and high growth potential may offer bondholders attractive returns, provided AI projects continue to perform as expected. The rapid pace of investment underscores both the transformative potential of AI and the financial stakes involved for creditors and investors alike.