Wall Street Eyes Potential AI Bond Surge as Risk Appetite Rises

Wall Street is bracing for a surge in corporate borrowing as companies line up to finance massive artificial intelligence investments, a wave of issuance that could push February bond sales to record levels. While demand across credit markets remains strong, caution flags are starting to emerge, with some investors warning that easy conditions could be breeding complacency.

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International Business Machines Corp. has already tapped the market, offering both dollar- and euro-denominated bonds after reporting quarterly revenue that beat analyst expectations. Meta Platforms Inc. and Microsoft Corp. also released earnings, clearing the way for potential bond sales of their own. January investment-grade issuance in the US is already nearing record territory, and bankers expect borrowing to accelerate in the months ahead as debt issuance shifts away from financial institutions and toward non-financial corporations.

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Historically, February and March are among the busiest periods for bond sales in the technology, media and telecommunications sector. Over the past four years, those two months have averaged about $44 billion in high-grade issuance combined, according to JPMorgan Chase & Co.—a sharp contrast to the roughly $9 billion typically raised in January.

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This year, however, activity is expected to be even heavier. JPMorgan credit strategist Nathaniel Rosenbaum says an unprecedented push to fund AI-related capital spending is likely to supercharge issuance. His team is projecting a record $400 billion in high-grade debt sales from the TMT sector in 2026 alone.

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“Most credit investors now assume we’re going to see very large bond deals from hyperscalers,” Rosenbaum said. “High-grade issuers are generally very market-aware, and they know that issuing debt when spreads are tight is often the smart move.”

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Investors entered 2026 with substantial cash reserves, often referred to as “dry powder,” and many are still looking to put that money to work even after a busy start to the year. That strong demand has helped keep credit spreads near their lowest levels in roughly 30 years, according to Matt Brill, head of North America investment-grade credit at Invesco. Market participants are now focused on which hyperscalers will come to market, how much they plan to borrow, and whether issuance will be spread out or front-loaded.

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“You might expect that after January we’d be tapped out, but there’s still plenty of cash ready to be deployed,” Brill said. “What investors really want is transparency around how these companies plan to fund their AI capital expenditures. The clearer the plan, the more comfortable the market will feel.”

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Brill added that solid earnings results and clearer disclosure around the use of bond proceeds tend to make new deals easier for investors to absorb. Meta exceeded revenue expectations and issued a strong outlook for the current quarter, while Microsoft reported record spending levels alongside slower growth in its cloud business. Investors also anticipate more long-dated bond issuance, though Brill cautioned that the long end of the market could struggle if supply becomes too concentrated.

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Beyond technology, acquisition-related borrowing and a large volume of maturing debt are expected to add to supply pressures. Maureen O’Connor, global head of high-grade debt syndicate at Wells Fargo & Co., estimates that investment-grade maturities will exceed $800 billion this year, rising to nearly $1 trillion in both 2027 and 2028. She also forecasts about $250 billion in acquisition-driven financing, up from roughly $200 billion last year.

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Demand, however, remains robust. Yield-hungry buyers such as insurers, pension funds and liability-driven investors continue to step in, supported by steady fund inflows. O’Connor noted that some investors are rotating back into investment-grade credit after spreads on mortgage-backed securities tightened following President Donald Trump’s directive for Fannie Mae and Freddie Mac to purchase $200 billion in mortgage bonds. Together, these dynamics have created what she described as a “Goldilocks” environment for high-grade debt.

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Still, not everyone is fully comfortable with the pace of borrowing. PineBridge Investments, which manages $735 billion in assets, is approaching AI-related financing with caution, particularly in leveraged credit. Steven Oh, the firm’s co-head of leveraged finance, said deals will be evaluated individually, citing concerns about excessive risk-taking and companies taking on too much debt.

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“When demand outstrips supply for an extended period, there’s always a temptation to push boundaries,” Oh said, adding that some issuers without a strong history in credit markets may now find easier access than usual.

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For now, issuance momentum remains strong. Companies are expected to seek funding across both US and European markets, using public and private channels, and may even explore hybrid securities or off-balance-sheet structures. According to Dominique Toublan, head of US credit strategy at Barclays Plc, issuers are likely to take advantage of every financing option available.

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“These companies will look to use everything on the table,” Toublan said. “As long as conditions stay favorable, they’ll want to lock in funding while they can.”

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