CDS Soar Collectively, "SpaceX and Others" Still Borrowing Furiously! How Long Can the AI Debt Frenzy Last?
The wave of AI infrastructure debt is reshaping the global credit landscape at an unprecedented pace, with the technology industry's debt reaching $500 billion in the first nine months of this year. However, frequent alarms have been raised in the CDS market, US Treasury yields have climbed to 5.3%, the highest in over twenty years, and Dalio pointed out that this is a "classic bubble that will be burst by interest rates."
The AI infrastructure arms race is subjecting the global credit market to an unprecedented stress test.
From Broadcom raising tens of billions of dollars for Anthropic and OpenAI, to SpaceX seeking a $40 billion loan to purchase Nvidia chips, and Oracle entering financing talks with Apollo and Goldman Sachs, the AI debt wave is sweeping the credit market at a stunning pace. Meanwhile, U.S. Treasury yields have surged above 5.3%, with the CDS market issuing an early warning—how much longer can this frenzy continue?
According to Bloomberg, Broadcom has just completed a $60 billion debt financing deal for Anthropic, with banks inviting investors to join a $42 billion syndicated Class A senior secured debt, and the $18 billion Class B subordinated debt led by Blackstone already in place. Broadcom has immediately started its next move—sources say the company has begun early-stage discussions on assisting OpenAI with financing to buy custom AI chips. Bloomberg’s latest report puts the early discussions at about $30 billion; The Wall Street Journal previously cited sources claiming the figure could reach $50 billion. The exact size remains to be confirmed as the numbers still diverge.
At the same time, SpaceX is seeking $40 billion in loans from banks and investors to purchase Nvidia chips, according to Bloomberg. The transaction is expected to close as early as 2027.
The credit market has sounded the alarm. Paramount’s CDS spreads have soared to the highest levels since the global financial crisis; SpaceX bonds have hit historic lows, with its 2056 bonds quoted at about 85 cents and spreads nearing junk status; Oracle’s entire credit curve has collapsed again, and bond yields are at record highs; Meta’s Project Beignet, representing the largest single issuance of corporate bonds for a data center project globally, has also dropped to a historic low. The yield on the 10-year U.S. Treasury soared to a decades-high of 5.36%, currently fluctuating between 5.27% and 5.30%, the highest level since 2002.
Borrowing Wave: Unprecedented Scale
Starting close to zero, debt financing in the technology sector has reached about $500 billion in the first nine months of this year. Giants such as Google, Meta, Amazon, and Microsoft are taking on massive debt to pay for chips, servers, and data centers. Goldman Sachs expects this figure to rise further to $1.2 trillion by 2027.
Chris Della Fave, Senior Vice President at Post Oak Group, estimates that AI now accounts for 25% of all corporate bond issuances, up from just 4% two years ago. Adjusted for inflation, the projected AI sector borrowing in 2026 will exceed not only the total financing for building out the entire Internet by cable operators, but also the total capital raised during the 19th century U.S. railroad expansion boom.
All kinds of innovative deal structures are emerging to satisfy investor appetite.
According to Bloomberg, SpaceX is planning to raise about $10 billion in bank loans and $30 billion in investment grade bonds, led by Apollo—even though its bond spreads are approaching junk levels. Some contacted investors received only a two-page memo with space images and a “somewhere in the universe” data center plan, but the “AI” label alone has been enough to push financing forward.
CDS and Credit Cracks: Alarms Have Sounded
The stock market appears calm on the surface, but undercurrents are surging in the credit market.
The CDS market has been the first to reflect multiple lines of stress. Paramount’s CDS spreads have exploded to their highest since the 2008 financial crisis; SpaceX bonds have fallen to new record lows in a single day; Oracle’s bond yields across the credit curve have hit historic highs; Meta’s Project Beignet bond, seen as the proxy for the whole data center industry, also hit a record low.
According to Goldman Sachs data, investment grade credit spreads have been largely flat since early September, with long positions by investors near historical highs, and the high-rated credit market showing no clear signs of easing. However, deeper risks are accumulating: JPMorgan statistics show there are $65 billion of leveraged loan transactions trading below 60 cents on the dollar (deep distress), with technology making up 39% of these troubled loans. Software firms alone face over $100 billion in refinancing pressure. The spread of CCC-rated bonds—the lowest grade—has broken through 1000 basis points, the first time since the 2023 regional bank turmoil.
Goldman Sachs’ credit volatility chart shows that expected credit spread volatility is currently below that of equities, interest rates, FX, and gold, seemingly calm—but this calm comes just as borrowers queue for tens of billions in AI financing. MacroVisor analysis argues that protection against wider spreads is currently unusually cheap, and the credit market will be where the first cracks of the AI financing cycle appear, not the equity market.
5.3% U.S. Treasuries: Resonating Board of Systemic Pressure
The AI debt wave is not pushing up rates alone, but it is having a compounding effect on an already stressed U.S. Treasury market.
10-year U.S. Treasury yields have topped 5.3%, the highest since 2002, with the latest auction closing at a yield of 5.30%, the highest since November 2000. Although the auction ultimately exceeded expectations, the issue price was 1.7 basis points below the secondary market, the largest “break” in over a year.
Siebert Financial Chief Investment Officer Mark Malek points out that investors who might have otherwise purchased U.S. Treasuries are now opting to buy bonds issued by tech giants like Microsoft, and this structural shift is raising the U.S. government’s funding costs. Chris Della Fave notes that even if geopolitical tensions and oil prices stabilize, “I don’t think yields will drop significantly because the impact of AI debt is already present.”
The pressure from rates is spreading. In the Eurozone, the spread between French and German bonds has widened again to 140 basis points; EUR/USD is hovering around a 17-month low near 1.12; higher U.S. dollar rates are also spilling into emerging markets—India’s central bank has raised the repo rate by 25 basis points to 5.50%, its first hike since February 2023.
Bubble Debate: Capital Allocators Choosing Sides
The debate isn’t limited to market strategists. Ray Dalio recently stated in Singapore that AI is a classic bubble, which will ultimately be punctured by ever-climbing interest rates. Temasek’s Chief Investment Officer called the reversal in AI trades the biggest market risk for 2027, and the fund plans to increase the proportion of publicly traded assets in its AI holdings from about 50% to 70-75%, in order to exit quickly if necessary.
Bank of America strategist Michael Hartnett points out that, historically, most bubbles have peaked when leading sectors reached about 40% of total U.S. equity market capitalization, and the top ten AI companies already make up 42%. He cites the railway industry as an example—railroad stocks once accounted for over 60%—suggesting the rally may not yet be over, but it is not a reassuring precedent.
The Bank of England’s Financial Policy Committee warned at the end of September that “the risk of a major adjustment remains,” especially if the market begins to doubt the pace or progress of AI development, affecting profit expectations.
Oracle is seen by some market participants as the barometer for the entire AI financing space: its debt has reached $125 billion, cash reserves are shrinking quarter by quarter, and even its Project Lighthouse data center in Wisconsin is reportedly delayed. Malek warns that if Oracle faces debt repayment problems, “it could trigger a chain reaction throughout the AI financing space.”
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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