Europe — European bond markets may come under mounting pressure as major American technology companies increase their borrowing to support massive investments in artificial intelligence infrastructure.
Companies including Alphabet, Meta, Amazon and Microsoft are expected to pursue additional funding from European investors as their spending on AI computing capacity, data centers and related infrastructure continues to expand.
The expected increase in corporate debt issuance could add considerable pressure to European financial markets, potentially making borrowing more expensive for other companies and governments.
Alphabet has already conducted its second euro-denominated bond sale this year, following a €9 billion issuance in May.
Marion Le Morhedec, chief investment officer for fixed income at Fidelity International, noted that European borrowing by technology companies had traditionally lagged behind activity in the United States. However, she said issuance was now gaining momentum.
She estimated that an additional €40 billion to €60 billion in debt issuance was being prepared.
Raising funds in foreign currencies also allows American technology companies to manage currency exposure linked to their international assets while accessing markets where financing costs may be comparatively attractive.
Nevertheless, the increasing volume of technology-related borrowing could intensify competition for available investment capital.
Data from LSEG show that US markets have recorded more than $250 billion in technology-related debt issuance so far this year, an 81% increase from the corresponding period last year.
Meanwhile, European issuance reached $39.3 billion, marking an approximately 5% year-over-year increase.
Although the US market remains substantially larger, analysts anticipate faster growth in European borrowing as American technology companies look beyond domestic markets for additional financing.
BNP Paribas projects that net supply of euro-denominated investment-grade corporate bonds will rise by 83% to €192 billion ($214 billion) in 2027, compared with €105 billion this year.
American companies are expected to contribute approximately €80 billion to €90 billion of the projected 2027 supply, with major technology firms accounting for a significant portion of the issuance.
The expansion could increase financing costs for businesses operating outside the technology industry.
As hyperscalers compete with utilities, telecommunications companies and automakers for investor interest, other borrowers may need to offer higher interest rates or more favorable pricing conditions to attract sufficient funding.
Jonathan Owen of TwentyFour Asset Management cautioned that European investors have comparatively limited experience with the enormous multi-tranche bond transactions frequently conducted in American markets.
Bond offerings ranging from €10 billion to €20 billion could challenge investor demand, particularly if several companies seek financing at the same time.
Some European businesses are already modifying their borrowing approaches in anticipation of these conditions.
Christian Hantel, a portfolio manager at Vontobel, said corporate borrowers outside the hyperscaler sector were increasingly steering away from longer-maturity bonds.
Companies that previously issued debt with 10-year maturities are now exploring shorter borrowing periods of five to seven years.
The increased financing activity could also place additional strain on government bond markets, which are already dealing with concerns surrounding public debt and inflation.
European Central Bank President Christine Lagarde previously highlighted that borrowing by hyperscalers had contributed to higher sovereign bond yields.
The developments underscore another financial consequence of the artificial intelligence investment boom. As major technology companies accelerate infrastructure expansion, their growing financing needs could have broader implications for borrowing costs throughout the European economy.
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