Investors are becoming increasingly uncomfortable with how much capital is needed to make the expansion of artificial intelligence a reality.
It’s playing out in real time in the bond market, where the biggest names involved in the blitz – Google, Amazon And Meta – are seeing credit spreads widen as pension investors demand higher compensation for lending to companies.
Yields rose this week after Alphabet raised its investment forecast, raising concerns that other hyperscalers could follow suit.
One reason why investment budgets are increasing is the rising electricity costs. For all hyperscalers who are building large data centers in the USA at breakneck speed, energy is a major cost factor.
GE Vernova CEO Scott Strazik told CNBC he expects the current inflationary environment to persist, in part due to the tightening geopolitical backdrop. Just this week, oil prices broke through the $100 per barrel mark.
The trend in Treasury yields is also causing concern among fixed income investors. Mizuho wrote to clients on Friday morning that investment increases are testing investors’ limits as companies once considered fortresses of capital now see dramatic increases in AI-related costs.
The analysts added that hyperscalers are currently on track to collectively spend more on capital expenditure than they generate in free cash flow by next year.
“It’s leading to intense discussions between bond and equity investors involved in the biggest names in tech,” said the portfolio manager of a credit fund, who asked to remain anonymous to discuss sensitive conversations.
As concerns grow, oracleThe 5-year credit default swap (CDS) is once again trading at a multi-year high.
In a note to clients published on Wednesday, Barclays credit analyst Andrew Keches wrote that Oracle’s CDS is again being seen as a proxy for AI debt fears.
“ORCL CDS’s appeal in recent history extends beyond company-specific fundamentals and reflects its role as a liquid hedge for AI investments, OpenAI execution, and broader data center spending narratives,” Keches wrote.
Oracle is facing questions from investors about how active it plans to be in the debt market in the coming years as building and leasing data centers becomes increasingly capital intensive.
Earlier this month, ratings agency S&P Global downgraded Oracle’s credit rating to BBB-, just one notch above junk status.
Still, company executives remain confident that Oracle can win the AI race. The company has a growing relationship with OpenAI and hyperscalers like Meta and Nvidiawho also work with Oracle on cloud architecture.
Still, portfolio managers who spoke to CNBC said the trajectory of technology bond yields could have implications for financing future deals.
Meta is looking to finance its $12 billion data center in Texas, with pricing expected to be finalized early next week, according to a source familiar with the talks. She did not want to be identified discussing the company’s plans.
The Financial Times reported that the deal will carry a higher borrowing rate than previous projects, a sign that investors not only want to charge more but are also questioning the return on investment.
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https://www.cnbc.com/2026/07/24/bond-market-anxiety-ai-capex-spending.html
