JPMorgan Asset Management predicts that the bond market is well-equipped to handle a surge in debt issuance from major technology companies as they expand their artificial intelligence infrastructure.
According to Bloomberg, the six largest hyperscalers now make up about 5% of the US investment-grade bond index, which is double their share from two years ago.
Stephanie Aliaga, JPMorgan’s global market strategist, highlighted that these companies have leverage ratios well below the market average and could comfortably take on an additional $1.5 trillion in debt.
“The bond market can absorb the growing supply of hyperscaler debt, as the increasing demand for artificial intelligence assures investors of their ability to meet their obligations.”
The proposed increase in debt would maintain the hyperscalers’ overall debt levels at sustainable levels, supported by current market conditions and investor confidence in AI investments.
“We believe that the market can easily handle this new issuance, potentially making the AI boom sustainable. Debt, when used wisely, can be an attractive form of financing for hyperscalers building long-term data centers.”
JPMorgan’s projections suggest that total AI infrastructure spending will reach $5.5 trillion by 2023. Aliaga anticipates that hyperscaler cash flows will only cover a portion of this, leaving room for debt and alternative capital to support the rest.
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