How AI giants could raise the cost of borrowing in Europe
France, Germany and Italy face a volatile bond market as war inflation bites. With US tech giants now issuing billions in AI bonds, they are competing with cash-strapped European governments.
European governments and companies face rising borrowing costs due to the competition from AI giants seeking investment capital. Four of the Big Five hyperscalers have issued around $250 billion in bonds in dollars and €37 billion in euros since 2025, with Microsoft joining in with a $25 billion sale. Goldman Sachs predicts total new AI hyperscaler bond sales will reach $420 billion next year, with €60 billion in euros.
This influx of capital, along with France's high public debt and rising sovereign bond yields, could force French government interest bills to spike to €91 billion next year and over €100 billion by 2028. The European Central Bank's economists warn that AI giants could make it harder for other companies and economic sectors to access finance, potentially leading to higher borrowing costs for governments and international lenders.
European firms may face pressure to cut investments and shareholder payouts to prioritize loan repayments, while cities and regions may also feel the effects of the AI boom on their borrowing costs. Despite not being the sole cause, US Big Tech's vast capital appetite could exacerbate Europe's fiscal challenges next year.
Written by urgent.news from DW English (Business)'s reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
