AI-Driven Debt Surge Pushes U.S. Treasury Yields to 25-Year Highs
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U.S. investment-grade bond issuance has hit nearly $1.5 trillion this year, up 36% year-on-year; tech giants borrowing for AI infrastructure are competing directly with Treasuries for the same buyers, driving long-end yields to a 25-year high.
How much are tech giants borrowing?
Amazon, Alphabet, and Nvidia are issuing debt heavily to fund AI infrastructure. Top tech companies alone account for roughly $200 billion in borrowing.
This means → that sum equals about 25% of the Treasury's net issuance to private investors — five times the ratio in 2025.
In plain terms = tech companies have gone from bit players in the bond market to direct competitors with the U.S. government for the same pool of money.
Why can these bonds steal buyers from Treasuries?
Alphabet's recent 30-year bond yields close to 6.4%, about 1.15 percentage points above the equivalent Treasury. A Meta data-center bond issued last month tops 7.5%.
Morningstar data shows funds restricted to investment-grade U.S. bonds have cut Treasury holdings this year, raising their average corporate-bond allocation to 30% — a three-year high.
This means → when tech giants offer higher interest, fund managers shift money that would have bought Treasuries into corporate debt. Treasuries struggle to find buyers, so yields must rise.
Is the Treasury's workaround actually working?
Treasury Secretary Scott Bessent has leaned on short-term bills to fund the deficit, holding 10-year and 30-year auction sizes steady. Barclays estimates this will compress net Treasury supply to about $1.2 trillion this year — roughly $440 billion less than 2025.
But Barclays also projects net corporate-bond supply will expand by about $474 billion, with tech giants contributing a large share.
In plain terms = the Treasury saved $440 billion in long-end supply; corporates added $474 billion. The space freed up has been not just filled but overshot by the AI borrowing wave.
How long will the pressure last?
Amazon and Alphabet have both raised their capital-expenditure forecasts. Nvidia says it is working with Wall Street firms to raise another $500 billion for AI projects.
Vanguard senior portfolio manager Alex Payne says AI spending is now the team's top daily discussion topic: "AI has been the biggest story in markets for the past few years — it touches everything."
This reflects a market caught between two expanding forces — annual fiscal deficits near $2 trillion and a still-growing AI bond pipeline — leaving the path for long-end yields as the market's biggest open question.
Content is for reference only, not financial advice.