BNP Says Too Much AI Borrowing Will End Bull Market in Credit

The breaking of the years-long rally in corporate bonds will happen when technology companies saturate markets with too much debt, according to a prediction from BNP Paribas SA.

In a report, BNP analysts set out their outlook for “the end of the bull market” as companies sell more and more debt to invest in artificial intelligence and data centers. In the short term, investors can still absorb the bond supply, but it will soon be a bigger issue, they said.

“AI is driving credit markets from bond scarcity to bond abundance,” wrote analysts including Viktor Hjort, BNP’s global head of credit strategy. “Over the next few quarters, there’s no clear driver of demand that can keep up with the rising supply trend.”

Amazon.com Inc., Alphabet Inc., Microsoft Corp. and other hyperscalers have raised billions already this year and more is expected to follow. BNP estimates the group may sell some $400 billion in bonds next year, adding that while other parts of the economy may be constrained by higher interest rates, it doesn’t seem to affect AI spending right now.

The report is a shift in view for the French bank’s analysts, who said that for the past three years credit markets have been “yieldy, defensive and under-supplied.” Now, they see spreads widening because of steep valuations, tighter monetary policy and too much debt.

By the end of 2026, they see euro investment-grade spreads six basis points wider, while dollar investment-grade may be seven basis points wider. Overall, the net supply of all fixed income will reach a record $3.7 trillion next year, BNP forecast.

“Credit is becoming oversupplied at a time when government bonds are too,” they wrote. “AI is accelerating the transition from mid- to late-cycle.”

Others have also flagged the risks around so much AI spending. Last month, JPMorgan Chase & Co.’s Matthias Reschke said the bond sales are testing the tolerance of investors.

“We don’t doubt that we will be able to place it, it’s all a question of price,” Reschke, JPMorgan’s head of European investment-grade finance, said in an interview with Bloomberg TV.

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