AI Financing Diverges: Stock Investors Warm Up, Bond Investors Turn Cautious

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Cailian Press, October 27 (Editor Xia Junxiong) — As artificial intelligence (AI) infrastructure construction continues to advance, the enormous funding needs of technology companies are changing the landscape of the financing market. Companies such as Anthropic and Meta are turning to the stock market to seek tens of billions of dollars in financing, while bond investors who had previously invested heavily in the AI sector are becoming increasingly cautious about financing demands that lack a clear endpoint.

AI infrastructure construction requires continuous funding investment and also requires investors to support technology companies' ambitious capital expenditure plans over the long term. To meet these needs, companies are actively using various financing channels such as stock issuance, private loans, project financing and bonds, among which project financing has grown substantially this year.

Amanda Lynam, chief credit strategist at Goldman Sachs, said: "This was destined from the start to require multiple financing channels working together."

Meta plans to raise up to $95 billion through a stock sale. According to the company, Nvidia, AMD and Broadcom may subscribe for up to $5 billion of the shares.

Meanwhile, SpaceX reached an approximately $40 billion financing lease commitment with an entity managed by Apollo Global Management for acquiring AI chips and related equipment.

Anthropic has formally submitted an initial public offering (IPO) application and may in the future raise as much as $100 billion through the stock market.

Steve Sosnick, chief strategist at Interactive Brokers, said: "Many of the concerns surrounding AI are gradually fading."

Bond investors care more about the endpoint of financing

Lynam pointed out that bond investors generally prefer large-scale financing plans with a clear endpoint. For example, in large merger transactions, investors can usually understand how much funding the company needs, when it needs the funding, and when debt repayment is expected to begin.

This means bond investors may be asked to continuously fund the same investment theme over several years. As companies issue bonds one after another, subsequent financing may need to attract buyers by offering conditions such as higher yields. This could depress the market prices of bonds investors already hold and push the yields on the relevant bonds further upward relative to benchmark bonds, that is, widen credit spreads.

Chris Coccoluto, head of global fixed income trading in Boston at Manulife Investment Management, said: "Investors want a clear understanding of exactly how large capital expenditure and bond issuance will be. As long as this clarity is lacking, or the financing demand has no clear endpoint, credit spreads will react."

Lynam noted in a recent report that the AI-related debt market has already seen an adjustment, with investors now demanding higher returns from companies with higher credit risk before they are willing to provide financing to them.

In addition, rising interest rates and the weak performance of two large bond deals in September — Paramount Skydance and SoftBank — have also prompted investors to become more cautious.

Lynam said: "This has suppressed market risk appetite."

Sosnick warned that for AI investment to ultimately pay off, many conditions still must be met.

He said: "I don't want to use the word 'precarious,' but if you step back and look, you will find that this really requires enormous conviction."

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