Global investment-grade corporate bond spreads rose to 129 basis points as the AI financing wave hits the credit market

Global credit markets are sending the strongest risk-off signal in more than a year. The prospect of technology companies taking on massive debt to build out artificial intelligence, combined with rising oil prices and political turmoil in France, has pushed global corporate bond spreads sharply wider.

Bloomberg index data show that global investment-grade corporate bond spreads surged to 129 basis points on Thursday, the widest level since May 2025.

Meanwhile, the CDX investment-grade index, which tracks the cost of default protection on US blue-chip corporate debt, rose to 64 basis points on Friday, hitting a high since March. Asia high-grade dollar bond spreads also widened to the highest since July 2025, and heightened volatility forced the Export-Import Bank of Korea to postpone a yen bond issuance.

The core market concern: technology giants led by Meta are preparing unprecedented financing scale, and whether AI investment can be converted into profit in time remains unknown.

David Del Vecchio, co-head of US investment-grade corporate bonds at PGIM Credit, said, "The market is digesting the shock from the potential issuance scale needed for AI buildout, and investors have little reason to step in proactively to fill the gap."

Lakshmanan R, head of South Asia and Southeast Asia corporate bonds at CreditSights in Singapore, said, "I think this is the beginning of a more sustained repricing of credit risk, the combined result of multiple global risks hitting the market in succession."

Meta's massive spending plan ignites market worries

The direct trigger for this round of credit market turmoil is the latest capital expenditure plan disclosed by Meta this week.

Meta said in a quarterly filing that the company is considering raising "hundreds of billions of dollars" over several years starting this autumn. Its spending commitments have climbed from about $700 billion in July to about $825 billion.

Meta also disclosed in the filing that a special committee regards locking in capital in advance as a strategic priority, because it needs to complete financing "before competitors fill up various financing channels," and described the current environment as "an increasingly challenging financing environment."

That wording further intensified market concerns about technology companies concentrating financing and crowding into a limited funding pool.

SpaceX borrows to buy chips, AI financing scale keeps setting records

Technology companies' borrowing ambitions go beyond Meta. Musk's SpaceX is seeking to raise $40 billion to purchase chips from Nvidia, a move that would rank among the largest debt financings in the history of AI buildout.

According to Semafor, citing people familiar with the matter, the financing rate will be higher than at SpaceX's previous bond issuance, with lower-rated bonds priced at a rate of about 8.3%.

Bloomberg Trace data show that as of Friday's close, the spread on SpaceX's 6.6% coupon bonds due 2046 widened by 13 basis points to 279 basis points.

According to data compiled by Bloomberg News, companies have raised more than $450 billion in global debt markets this year for AI-related spending. John Lloyd, head of global multi-strategy and corporate credit at Janus Henderson in Denver, expects the total scale of debt issuance for AI buildout next year may approach $1 trillion.

Can the market absorb it? Divergence emerges

Facing the coming trillion-dollar financing wave, market participants hold differing views.

Lloyd said the market should be able to absorb this scale, and investors are not unprepared for the coming financing. But he also warned that market turbulence is inevitable: "The risks are widely known, so every data point can trigger volatility, because it changes the market's weighting of these risks."

The bigger divergence lies in the return on AI investment itself. Ken Griffin, founder of hedge fund giant Citadel, warned of bubble risk in AI; Blackstone President Jon Gray took the opposite stance, saying demand is "almost parabolic" and there is no need for excessive worry.

It is worth noting that despite the widening, the absolute level of US investment-grade corporate bond spreads remains in a relatively low historical range, with 87 basis points clearly below the average of about 109 basis points over the past decade, indicating the market as a whole has not yet fallen into panic.

Strong earnings may instead become a risk factor

A rather ironic market logic is taking shape: the more profitable technology companies are, the more investors may worry.

Meta and SpaceX both reported results this week that beat analysts' average expectations, highlighting that these heavy borrowers can already generate excess profits before investments such as large-scale data centers are fully operational.

However, Travis King, head of US investment-grade corporate bonds at Voya Investment Management, raised a warning. He said, "At the index level spreads are still narrower, but beneath the surface it is a mess. If technology stock earnings bring good news, the only implication may be that they will further expand spending plans."

This means strong earnings will not only fail to calm market concerns, but may instead set the stage for the next round of even larger borrowing. Risk disclosure and disclaimer

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