(Bloomberg) -- The bonds sold by hyperscalers to fuel their artificial intelligence ambitions have become a drag on investor portfolios from London to Tokyo.
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From falling prices and wider spreads to negative total returns, the debt is underperforming on almost every metric. The bonds are in the red on average, according to data compiled by Bloomberg, and rank among the worst performers in indexes this year. As Big Tech firms such as Meta Platforms Inc., Alphabet Inc., and Amazon.com Inc. ramp up borrowing to fund data centers and other AI infrastructure, they have tapped pools of capital worldwide. The wave of issuance has become a test of credit market depth, while growing unease over the scale of AI spending is hammering the shares of chipmakers and cloud-computing giants.
"The risk is that if there is some form of disappointment around AI capex, then we could see a reaction that won't be concentrated in just one market," said Rufaro Chiriseri, head of Europe fixed income at RBC Wealth Management. "It could be an issuer-specific story and has effects across other markets," added Chiriseri, who is underweight the tech sector.
About 79% of the sector's bonds sold since early 2025 are currently indicated at a wider spread compared to their first trading day, according to data compiled by Bloomberg. They have fallen 3.3 points from their issue price on average and are 1.4% down on a total return basis. The bonds are currently among the worst performers in every market they were issued.
Alphabet, Meta, Amazon and Oracle Corp. have issued more than $300 billion since the start of 2025, according to data compiled by Bloomberg. Close to $80 billion of the debt was issued in currencies including the British pound, the euro and the Japanese yen — and the borrowers became some of the biggest names in those indexes practically overnight.
In sterling, for example, Alphabet is the biggest non-financial issuer on the high-grade index. In Swiss francs, Amazon and Alphabet are among the four biggest borrowers.
Big Tech "had to issue in all currencies as the US dollar market, which is the largest credit market globally, can't absorb it. Some of them built up from zero bonds in those other currencies and that's going to put a lot of pressure," said Bryn Jones, head of fixed income at Rathbones Asset Management.