Big tech wants to borrow money for decades, but investors have better options. A tidal wave of AI debt is threatening to flood the bond markets, and investors might find shelter in surprising places. Recent earnings reports by the so-called hyperscalers have driven expectations even higher for their collective AI spending plans, and with projections of further strained cash flows, they may need to raise a lot more debt to pay for that.

$400 billion in highly rated investment‑grade bonds could be issued directly by hyperscalers globally in 2027, on top of roughly $250 billion anticipated for this year. Bond prices are often quite sensitive to supply, so these expectations have helped push down prices and push up yields of even the biggest and most creditworthy companies’ bonds.

The group of investment‑grade hyperscalers tracked by Barclays includes Alphabet, Amazon.com, Microsoft, Oracle and SpaceX. Their bond spreads over benchmark Treasurys have widened by almost a quarter percentage point over the past month through July 30.

For bond investors, one temptation might be to stick with the issuers with the highest credit ratings and to chase higher yields by focusing on their longest‑term bonds, but doing the opposite might prove to be the better bet.