Big Tech's AI Borrowing Spree Strains Bond Markets as Yields Flirt With 24-Year Highs

Asian stocks slipped on Thursday as sovereign bond markets came under strain from reports that some of the world's largest technology companies were preparing to borrow heavily to buy artificial intelligence chips.

The Wall Street Journal reported that SpaceX, Broadcom and Oracle were seeking billions of dollars in new debt to finance AI hardware purchases, according to Reuters. Broadcom was said to be pursuing about $50 billion in financing. SpaceX planned roughly $30 billion in investment-grade debt plus $10 billion in loans to buy Nvidia chips. The cost of insuring SpaceX debt against default climbed to record highs, a sign that credit investors were demanding heavier compensation for the risk.

From cash to credit

The reports landed in a market already on edge. The U.S. 10-year Treasury yield traded around 5.35 percent on Thursday, easing from a peak of 5.37 percent a day earlier, the highest level since 2002. A strong $39 billion 10-year auction helped pull yields back from their multidecade highs. Gold futures held near $4,136 an ounce, a sign that some investors were still reaching for safety.

Nigel Green, CEO of deVere Group, told Reuters the shift was the real story of the AI boom:

"The AI build out started on cash. It's increasingly running on credit, and credit changes the risk profile entirely."

The comment captured a growing worry on trading floors: the largest technology companies funded the first phase of the AI buildout out of pocket, but the next phase is arriving on borrowed money. Debt raises the stakes for every participant, because the projects must generate enough return to cover not just the cost of the chips but the interest on the borrowing behind them.

The Nvidia loop

Investors were also openly questioning the circularity at the center of the AI trade. Nvidia's chips are the prize everyone is borrowing to buy, and Nvidia itself has been deeply involved in financing arrangements across the ecosystem. Analysts and commentators have begun asking whether the world's most valuable company is, in effect, bankrolling its own customers, and what happens to that loop if demand slows or the credit cycle turns.

The reports did not come with many hard details about timing, terms or which banks would underwrite the deals. What mattered for markets was the direction: even the companies with the strongest balance sheets in corporate history are now tapping debt markets to keep the AI buildout moving at its current pace.

What to watch

Bond traders will be watching upcoming corporate issuance calendars closely, along with any further disclosures from the companies named in the reports. Credit markets were already demanding record-high premiums to insure SpaceX debt, which suggests the bond market's tolerance for AI-linked borrowing is being tested even before the money is raised.

The broader question is whether the AI boom can sustain its current velocity once the cash runs out and the credit bills come due. For now, the bond market is answering with the highest yields in nearly a quarter century, and a warning that the credit phase of the AI trade has begun.