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 countries, including France, Germany, and Italy, are facing rising sovereign bond yields and strained public finances as US tech giants pour billions into AI development. Four of the Big Five hyperscalers – Amazon, Alphabet (Google), Meta, and Oracle – have issued more than $290 billion in AI-related bonds since the start of 2025, with Microsoft joining the fray recently.
Goldman Sachs projects total AI bond sales to reach $420 billion next year, with €60 billion in euros. This influx of capital could make it more difficult for European companies and governments to access financing, as public debt alone already exceeds 119% of GDP in France, with interest bills poised to soar. The European Central Bank warned that AI giants could exacerbate competition for fixed income funds, potentially raising borrowing costs for governments and international lenders such as the EU and the European Investment Bank.
Rising interest costs are already impacting European companies, with interest expenses as a share of sales surging by nearly half at the Stoxx 600 index since 2022. Economic studies suggest that European cities and regions may also face higher borrowing costs as AI adoption accelerates, putting a strain on municipal budgets for public services.
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