JPMorgan Asset Management is projecting that the bond market remains positioned to handle a surge in debt issuance from major technology companies expanding artificial intelligence infrastructure.
The six largest hyperscalers now comprise roughly 5% of the US investment-grade bond index, double their share from two years ago, reports Bloomberg.
JPMorgan global market strategist Stephanie Aliaga emphasized that the group’s leverage ratios stay significantly below the broader market average.
She estimated the companies could comfortably add another $1.5 trillion in debt.
“The bond market can absorb the growing supply of hyperscaler debt, as rising artificial intelligence demand reassures investors that the companies can pay their obligations.”
The proposed increase would keep the hyperscalers’ overall debt load sustainable given current market conditions and investor confidence tied to AI spending.
“We think they’re going to keep going… We think that the market is very capable of absorbing this new issuance. And if anything, it might just enable this AI boom to be sustainable. Debt is not inherently bad by any means, but it can be a really attractive form of financing for some of these hyperscalers building data centers that they intend to use for five, 10 or more years.”
JPMorgan projects that the total AI infrastructure spending will hit $5.5 trillion by 2023. Aliaga believes hyperscaler cash flows will cover only a fraction of the bill, leaving debt and alternative capital with room to support the spending.
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