Tech companies’ AI debt issuance drops sharply in September

In September, tech firms issued $23 billion in AI-related debt globally, down nearly 50% from August, according to Morgan Stanley data analyzing public bonds and private placements. This decline continues a downward trend from June, when companies raised a record $113 billion for AI infrastructure such as data centers and chips.

In the US investment-grade market, where major tech companies borrowed $306 billion between January and August, AI-related bond issuance ceased altogether in September. Morgan Stanley cited the substantial debt already raised earlier in the year as the primary reason for the drop. They also pointed to mounting investor doubts about whether significant investments would yield returns and growing political resistance to data center construction.

Overall, companies have accumulated an estimated $466 billion in AI-linked debt in 2024, a significant increase from $101 billion during the same period last year. Despite this slowdown, Wall Street banks are planning a $60 billion financing package for Broadcom and Anthropic, while SpaceX is reportedly negotiating a $40 billion deal to acquire Nvidia chips.

Both transactions are anticipated to be syndicated to investors in the coming months. Data centers in the US have been met with local opposition from residents concerned about water supply and air quality impacts. In New Mexico, Oracle's data center project, dubbed "Project Jupiter," has become a contentious issue. The project's loans, totaling around $18 billion, are now facing strain after Oracle issued a force majeure notice due to electricity access difficulties.

As of recent days, these loans were trading at around 85 cents on the dollar. The surge in new debt supply has enabled credit investors to demand higher yields, thereby raising borrowing costs for tech giants known as hyperscalers.