Hyperscaler debt binge pushes yields up as investor demand cools
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July 29 : Major U.S. technology companies are borrowing heavily as they ramp up spending on their artificial intelligence buildout, and at steadily higher yields as investors become more selective about absorbing the growing supply.
Amazon, Alphabet, Meta Platforms and Oracle issued about $194 billion of bonds in 2026 through July 7, up 79 per cent from roughly $108 billion in all of 2025, according to a Reuters analysis of LSEG data.
Goldman Sachs expects bond issuance by the five hyperscalers, including Microsoft Corp, to reach roughly $250 billion this year and $400 billion in 2027.
The added supply has led to widening borrowing spreads over risk-free rates for these investment-grade firms across major maturity buckets.
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For Amazon, Alphabet, Meta and Oracle, the median spread on 2- to 4-year bonds rose to 40 basis points from 30 basis points in 2025. The median spread on 5- to 7-year debt increased to 60 basis points from 50 basis points, while the median spread on bonds maturing in more than 20 years rose to 118 basis points from 108.5 basis points.
Secondary-market performance has also deteriorated. A Reuters analysis of LSEG data showed that 78 of 91 hyperscaler bonds issued in 2026 with comparable pricing data were trading at higher yields on July 28 than at issuance. The median increase was about 22 basis points.
“We’re in a place where we’re making these very large investments with the bet that we have return on invested capital coming in the future,” said Colby Stilson, head of fixed income at Brown Advisory.
“I don’t see sort of a point in time in the near future where that sort of supply goes away. Technically, that puts pressure on spreads.”
Investor demand, while still strong in absolute terms, has weakened as supply has accelerated.
Apollo Global Management said cover ratios for hyperscaler bond sales, a measure of investor orders relative to the amount issued, fell from nearly five times in February to below two times in July.
A cover ratio of three times means investors submitted orders for three dollars of bonds for every dollar sold. Apollo said the decline suggests borrowers may have to offer wider spreads to attract sufficient demand for future deals.
Amazon’s recent sales illustrate the shift. Research reports compiled by AlphaSense showed its March U.S.-dollar bond sale was about 3.4 times oversubscribed, compared with around 1.6 times for its July offering.
“We’re already seeing fatigue within credit markets in supporting this massive debt issuance,” Stilson said.
Sage Advisory said Amazon’s latest $25 billion bond sale pushed the spread on a 30-year Amazon bond issued earlier this year about 20 basis points wider. It estimated that the hyperscalers’ combined U.S.-dollar debt footprint had more than doubled since September to over $360 billion.
“Each successive jumbo deal has pressured spreads wider before they eventually stabilize and experience modest rallies,” Sage Advisory said.
The new-issue concession data in the LSEG dataset pointed in the same direction. A new-issue concession is the additional yield a borrower offers investors to price a bond sale relative to its existing debt.
The median deal-level concession rose to 12 basis points in 2026 from 2.25 basis points in 2025, with the latest reading based on an Amazon transaction.
Goldman expects hyperscaler capital expenditure to reach about $750 billion in 2026, against projected operating cash flow of roughly $778 billion, with debt issuance equivalent to about one-third of capital spending this year and around 35 per cent in 2027.
Goldman said market saturation and issuer concentration were likely to become more binding constraints as issuance accelerates, while falling cover ratios and wider spreads suggest investors are already demanding greater compensation to absorb the supply.
(Reporting By Patturaja Murugaboopathy; with additional reporting by Gaurav Dogra in BengaluruEditing by Vidya Ranganathan and Nick Zieminski)
Source: Reuters
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