US tech firms may crowd out others in euro bond market and raise credit risk
FILE PHOTO: The logo of Amazon is pictured at a company logistics center in Carquefou near Nantes, westren France, May 6, 2026. REUTERS/Stephane Mahe/File Photo
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FRANKFURT, Sept 2 : U.S. tech giants are flooding the euro zone bond market to fund huge AI investments, potentially crowding out other borrowers, pushing up financing costs even for governments and raising credit risks, according to a European Central Bank blog post.
Tech firms such as Google, Amazon and Microsoft, often referred to as hyperscalers, could spend as much as $1 trillion on AI-related investments by 2028, credit analysts say, forcing them to tap debt markets around the world.
The firms have about €40 billion ($46 billion) of bonds outstanding in the euro zone, a relatively small share of the market, but account for nearly 10 per cent of gross new issuance. Amazon and Alphabet have been the largest corporate issuers in the euro zone bond market this year.
“U.S. big tech companies could push up borrowing costs for all sectors as they accumulate debt and account for a growing share of bond markets, with a potential spillover to the sovereign and supranational segment of the bond market,” the blog, which does not necessarily reflect the ECB’s views, said.
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The volume of new debt issued by big tech firms could test investor appetite, while expectations of even greater bond supply may amplify this effect, potentially lifting borrowing costs across the market. The impact could be especially pronounced given limits on how much debt investors can absorb.
Tech firms may also crowd out other issuers as passive investors that track bond benchmarks automatically increase their holdings of the sector, putting additional pressure on competing bonds and influencing spreads.
The blog’s authors also argued that the relatively high credit ratings assigned to big tech debt may prove overly optimistic.
“The way rating agencies approach this sector may be based on assumptions on future revenue growth and leverage which may not stand the test of time, heightening the vulnerability to mispricing of credit risk,” the blog said.
($1 = 0.8636 euros)
Source: Reuters
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