Long-term interest rates have climbed to their highest levels in two decades, and hyperscaler debt issuance is emerging as a key culprit.
Apollo Global’s chief economist Torsten Slok flagged “hyperscaler issuance” as one of three main drivers behind 30-year Treasury yields sitting at a 20-year high, alongside inflation and fiscal deficits, in a recent note.
Palumbo Wealth Management coined the phrase “AI Debt Tsunami” in a note last week, pointing to Morgan Stanley figures showing high-grade AI debt supply reached $270 billion by early July — more than double all of 2025’s total.
Off-balance-sheet debt, including sale-leaseback structures on data centers, has reportedly swelled to $1.65 trillion, according to Nikkei Asia, further obscuring true leverage
Hyperscaler leverage ratios doubled from 0.9x to 1.8x in roughly six months, and the bond market’s pain threshold has shrunk from $75 billion to just $25 billion, according to Goldman.
Credit-default-swap spreads on major tech issuers have widened sharply as investors weigh whether AI investments will generate returns fast enough to service the new debt load.
Goldman singled out Microsoft and Alphabet for retaining “fortress” balance sheets and strong free cash flow, even as the broader AI ecosystem faces mounting strain.
The firm projects hyperscalers will spend a combined $5.8 trillion on AI infrastructure through 2030, a figure that will keep pressuring credit markets and, by extension, long-term Treasury yields for years to come.
This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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