Tech Bonds Hit by Selloff as AI Debt Fears Race Through Markets

The bonds of some of the biggest US tech companies slid Thursday amid renewed worries about the scale of the debt-fueled artificial-intelligence boom and escalating conflict in the Middle East.

With oil surging over $100 a barrel, inflation concerns are mounting and longer-term bond yields are climbing, threatening to increase the borrowing costs for the companies that have been piling hundreds of billions of dollars into AI.

A quarterly earnings report late Wednesday from Alphabet Inc., Google’s parent, added to the rout because the company raised its capital spending forecast for the year, indicating that the flood of new debt sales that are financing the investment boom will likely continue.

The selloff pushed up the yields on Alphabet 5.5% bonds due in 2046 by about 9 basis points to 6.11%. That’s about 91 basis points over the top-rated benchmark, up 6 basis points from Wednesday.

Oracle Corp., another company at the center of the data-center build-out, saw the yields on some of its debt due in 2030 rise 17 basis points to about 6.09%. And investors bid up credit default swaps tied to the debt of other companies, including Microsoft Corp. and Amazon.com Inc., in a sign of concern about increasing risk.

“The market is being hit with a triple whammy of AI capex anxiety, oil shock and a rate repricing,” said Tony Trzcinka, a portfolio manager at Impax Asset Management.

The bond moves came amid a broader selloff in the stock market, which drove the Nasdaq 100 Index down nearly 2% and sent the so-called Magnificent Seven tech companies to the biggest one-day drop since the tariff tantrum in April 2025.

The heavy borrowing for AI investment — which has totaled some $350 billion this year alone — has already put pressure on the debt markets, where there have been some signs that investors are struggling to absorb all of the new debt. There are also broader worries about whether AI will be profitable enough to justify the costs.

In another sign of growing anxiety, investors yanked $7.1 billion of cash from US high-grade bond funds for the week ended Wednesday, the most since April 2020 in the early days of the Covid pandemic, according to LSEG Lipper data.

“Tech used to be where investors hid and now hyperscalers are on pace to rival the Big Six banks as the top issuers in investment-grade,” said Mark Clegg, senior fixed-income trader at Allspring Global Investments. “Even the whisper of another $20 billion deal and the whole complex reprices wider. This is supply fatigue, and it’s accelerating week by week.”

There are more big deals in the pipeline. BlackRock Inc. is looking to sell more than $12 billion of bonds to help finance a Meta Platforms Inc. data center in El Paso, Texas. And Barclays Plc is boosting its issuance projections for US high-grade debt sales this year to a total of $1.9 trillion from previous estimate of $1.6 trillion amid the AI debt binge.

“The market is really coming alive to the fact that supply, across all asset classes, won’t abate whatsoever,” said John Lloyd, global head of multi-sector credit and a portfolio manager at Janus Henderson Investors.