Tech’s $250B AI Borrowing Lifts Long-Term Treasury Yields

Major technology companies have raised about $250 billion in global debt this year to finance data centres, power connections and computing capacity for artificial intelligence projects, according to a Morgan Stanley tally. Heavy issuance from firms such as Meta Platforms and Oracle coincided with a selloff in US Treasuries that pushed 30-year yields to their highest levels since 2007 in May; yields have since pulled back but remain above levels from the start of the year.

The funds are being used to build long-lived infrastructure alongside shorter-lived computing equipment. Data-centre buildings, land and power links can remain productive for two to three decades, while AI chips typically require replacement every few years. Companies are seeking long-term fixed-rate debt to match the life of enduring assets and to lock in borrowing costs.

Market participants say the surge in corporate issuance added supply to fixed-income markets and altered demand for long-duration government securities. Inflation concerns and changing expectations for Federal Reserve policy also contributed to the May move in Treasury yields.

Institutional investors monitor duration risk, which measures how sensitive a bond is to interest-rate changes. Insurers and pension funds often face limits on holdings from a single issuer and rules tied to bond duration. Private lenders commonly prefer floating-rate loans, so some technology firms issue shorter-dated or floating-rate debt and use interest-rate swaps to convert that exposure into longer-term fixed-rate funding.

Credit markets have reflected the higher debt loads. The cost of Oracle’s five-year credit default swap has risen sharply over the past year, a sign investors are factoring in the company’s expanding borrowing related to AI projects. Higher corporate borrowing increases future debt-servicing needs and could lead to more issuance.

For comparison, the US Treasury sold roughly $540 billion of 10-year notes over the past year, providing a scale point for the additional supply the market has absorbed. Analysts say AI-related corporate issuance is not the sole driver of Treasury markets but has become a meaningful influence alongside Fed policy, inflation data, fiscal deficits and global demand for safe assets.

Thomas Urano of Sage Advisory compared the scale of corporate AI spending to “a major government spending programme,” highlighting the size of the financing need. Jonathan Hill, head of US inflation market strategy at Barclays, observed that the recent rise in yields differed from a typical inflation-driven selloff because real yields increased while long-term inflation expectations remained relatively contained.

Investors and market strategists expect the interaction between heavy corporate borrowing and government issuance to continue affecting long-term yields in the months ahead.